Long-term ocean freight rates have continued their downward trend in August, marking a year of steady decline for carriers, as reported by Xeneta. Carriers are grappling with challenges in the contract market, attributed to weak demand and an increasing ship capacity. The situation has resulted in significant and widespread reductions in long-term shipping rates.
Xeneta Shipping Index (XSI) data reveals a notable 7.8% decrease in contracted rates for August, accumulating to a substantial 62.7% drop compared to the rates from the previous year. Xeneta, an Oslo-headquartered ocean and air freight rate benchmarking and market analytics platform, made this announcement through a press release.
One of the most impacted regions is the Far East, known as the world’s busiest in terms of shipping activity. Xeneta’s regional sub-index reported a staggering 75% year-on-year contract value reduction in this area.
This trend in long-term rates contrasts with the spot market, where major trade rates have experienced recent increases. Typically, the long-term market follows trends seen in the spot market. This discrepancy suggests that the current benefits for shippers may be temporary.
In August, the XSI for European imports saw a decrease of 3.4%, reaching a value of 178.7, compared to the previous month. Over the past year, this sub-index has plummeted by 60.1%.
Similarly, the XSI for European exports experienced a decline of 2.8% from July, settling at 188.1 in August. This sub-index has halved over the past year, dropping by 52.4% compared to August 2022.
The impact of restrictions on Panama Canal transits is increasingly affecting both US imports and exports.
The XSI for Far East exports has witnessed the most significant decline, with rates falling by nearly 75% since August 2022—making it the most affected major XSI import/export region.
In August, the Far East imports XSI fell by an additional 2%, reaching a low of 120.2 points, the lowest among all the XSI sub-indices. Over the past year, rates in this sub-index have declined by 51.1% since its peak exactly a year ago.
This ongoing decline in long-term ocean freight rates reflects the challenges faced by carriers in a market marked by weakened demand and growing ship capacity. While spot market rates have seen recent increases, the sustainability of these advantages for shippers remains uncertain. Additionally, the impact of restrictions on Panama Canal transits further complicates the situation for US imports and exports.