Long-term container freight rates are falling at a record pace as contracts are renewed at lower levels.
And worse could be in store as more contracts are set to expire in the coming months.
Average long-term contracted rates dropped by 13.3% in January, their largest ever month-on-month drop, according to the Xeneta Shipping Index.
It is the fifth month in a row of falling prices, with little sign of change ahead in what looks like being a challenging year for carriers.
The largest drops were on the Far East export subindex, which lost 18.1% of its value.
Xeneta chief executive Patrik Berglund expects upcoming falls to rewrite the record books.
“January has been difficult for the carriers and there’s a real danger of some horrific times on the horizon,” he said.
He noted that contracts negotiated in the super-hot market of May 2022 are set to expire in April.
“With the market looking so depressed, overcapacity seems certain to loom large throughout the year,” he said.
“The only hope of protecting rates is removing capacity at a pace that mirrors demand, or rather the lack of it.”
Spot rates fall further
Spot rates are failing to provide much support to the long-term market.
The FBX Global Index, a measure of several container trades, dropped 9% to $2,020 per 40-foot equivalent unit (feu) in the week to 1 February.
The index was dragged lower by sharp declines on the transpacific front and backhaul routes.
Rates from Asia to the US West Coast dipped $113 to $1,248 per feu, while prices to the US East Coast fell 9% to $2,641 per feu.
On the trades from Asia to North Europe, spot rates plummeted by $500 to $2,920 per feu.
Rates on the transatlantic, which has been the star performer in recent months, decreased $412 to $4,750 per feu.
“The industry now faces the typical post-Lunar New Year lull,” said Judah Levine, research lead at Freightos.
Carriers are expected to increase the rate of blank sailings significantly, he noted, in the hope that volumes pick up in the coming months as inventories run down and consumer demand rebounds in time for peak season.
