Doom and More Gloom for Shippers and Forwarders as Container Lines Make Hay

NORWAY – WORLDWIDE – Oslo headquartered air and freight rate benchmarking platform Xeneta has published its long term ocean container rates for October, and it's not good news for shippers.

A comprehensive study of the available data leads to the conclusion that, following climbs of 3.2% in September, 2.2% in August and a huge 28.1% in July 2021 this month a further 2.2% jump means the Xeneta Shipping Index (XSI®) Public Indices stand at a colossal 93.1% up year-on-year, with little hope of relief on the horizon for embattled shippers.

Over the course of 2021 alone Xeneta’s global index has now recorded a hike of 90.1%. For shippers the news gets worse according to Patrik Berglund, CEO of the rate benchmarking and market intelligence platform, who sees no sign of a rate reset on the horizon and comments:

“It remains a very challenging market for shippers, and a very profitable one for carriers. We’re not dealing with the astronomical increases we’ve experienced in past months, and indeed some trades are experiencing slight rates reductions, but overall the arrow remains pointing resolutely skywards.

“Carriers are still sitting pretty in a sellers’ market and, basically, calling the shots. For example, Maersk is reportedly shunning business from some freight forwarders in an effort to deal directly with cargo owners. In doing so, it’s seeking to provide a single end-to-end solution on key lanes and maximise profits. Some, such as CLECAT, the European Association for Forwarding, may suggest this is an abuse of power. That’s up for debate. But the fact it’s a demonstration of power certainly is not in question.”

Certainly this last point is a dramatic illustration of changing relationships between the box lines and freight forwarders. Many shippers may reflect that the ‘putting all eggs in one basket’ approach may work for them short term, that is not to say however that in the long run having an agent seek out the overall best deal will not be bettered.

Berglund points out in addition to carrier strength, lack of equipment and strong demand, port congestion remains an issue, especially in the US, where the number of container ships waiting to berth at LA and Long Beach hit over 80 earlier in October, prompting this week those ports to introduce charges for boxes retained there. Meanwhile a power crisis in China, where factories are being forced to curb production, is causing additional supply chain pressure.

Regionally, the rates picture was more mixed in October than recent months. European imports on the XSI® had a marginal decline of 3.7% - the first month-on-month fall since June. However, the index still stands 122.1% against this time last year. European exports also dipped slightly, falling by 2.2% across October, but remain 50% up year-on-year.

In the Far East, imports on the XSI® fell, by 3.2% (up 49.9% against October 2020), while the export benchmark surged ahead with a 7.9% month-on-month boost. It is now some 136.2% higher than this time last year. In the US, both import and export benchmarks fell moderately, the former by 1.5% and the latter by 3.5%. However, strong growth throughout 2021 leaves import rates 64% higher and exports up 15.8% on a year-on-year basis. Berglund concludes:

“It’s difficult to read too much into the current fluctuations. After such a prolonged period of rates growth it would be easy to anticipate an adjustment downwards, but with all the supply chain challenges, continued lack of capacity and ongoing demand I certainly wouldn’t count on it, as ever, this market is almost impossible to second guess.

“Shippers want predictability and that’s especially true when key trading periods, such as Christmas, are on the horizon. However, instead of that they’re getting clogged supply chains, limited (or zero) available carrier capacity, rates they can’t control, and a growing sense of uncertainty. All in all, a dream year for the carriers is an ongoing nightmare for them.”

Photo: Courtesy of Maersk Line.