Xeneta tips rates falls to continue

: Latest News; Sunday, 20 August 2023

Spot rates on the Trans-Atlantic front-haul trade from North Europe to the US East Coast (USEC) are plummeting rapidly, according to Xeneta's platform data.

The monthly average rate for a 40-foot standard FEU has dropped dramatically, falling from US$5,298 (excluding Terminal Handling Charges) in January to a mere US$809 in August. This significant decline serves as a reminder that markets can shift suddenly. It's worth noting that just as these rates have dropped, they could also rise swiftly, as has been the case recently for other main trades.

The trans-Atlantic trade’s fall of 85 per cent is a serious loss-maker for carriers. Taking out the THC narrows the ocean freight rate, which by mid-August was priced at almost the same level.

“This is a major meltdown for a trade that was steady and ‘dull’ for decades before suddenly becoming the poster boy of the container freight market in 2022, defying gravity with elevated rates for a long time after the rest of the market had crumbled,” said Peter Sand, chief analyst Xeneta.

Shippers in driving seat for now

Shippers are taking full advantage of this new reality, regaining the upper hand after the 2021-2022 pandemic period delivered dramatically high freight rates. Xeneta’s real-time data, crowd-sourced from leading global shippers shows the strongest are now paying less than US$475 per FEU for spot business, which Sands points out is an all-time low.

"Don't wait around – jump on those deals while you can,” said Sands.

"Just like we've seen with front-hauls from Asia to the US and EU, carriers will be dead set on boosting the Transatlantic spot market once again.

"They're not keen on bleeding cash in yet another trade. You must stay on your toes and constantly monitor rates to know when to go to market.

“The data also shows that the number of long-term contracts coming into force in 2023 is significantly down on past years, indicating that shippers are clearly not happy with the rates on offer nor being drawn into the kind of closer relationship carriers are seeking,” he adds.

However, at US$2,000 per FEU (excluding THC), North Europe to USEC long-term rates are still 2.5 times above spot levels, meaning this is the only front-haul trade where long-term business remains above short-term rates; all other key trades have normalised in this respect. But this too can change rather quickly.

So, what is behind the spot-rate collapse?

Tanking volumes

Transport volumes on the trade were down by 13.6 per cent in the first half versus last year (source: CTS), with April alone scoring a 23 per cent year-on-year fall. This is clearly visible from Xeneta data showing a spot-market slide from US$3,875 per FEU at the end of March to US$2,450 per FEU 01 May.

“The second quarter was worse than the first, and looking ahead Xeneta expects demand to fall short of 2022 during every month in the second half as well,” says Sand.