According to an analysis provided by Xeneta, the dramatic spike in the ocean freight container shipping market is reaching its peak as importers push back against spiralling spot rates.
Data by Xeneta shows average spot rates from the Far East to US East Coast increased by 3.7% on 15 July to stand at USD 10 045 per FEU (40ft equivalent shipping container). Meanwhile, into the US West Coast, spot rates increased by 2.0% to stand at USD 8 045 per FEU.
While this means spot rates are up almost 150% on these trades since the end of April, the latest increases of 3.7% and 2.0% are far smaller compared to 1 July when rates rose by 22% into the US East Coast and 12% into the US West Coast, Xeneta informs. Emily Stausbøll, Xeneta Senior Shipping Analyst, said that Xeneta data shows some ocean container carriers are still pushing spot rate increases in mid-July, but, for the first time in a long time, some carriers are offering lower spot rates.
Crucially, this suggests a growing level of available capacity in the market and shippers can once again start to play carriers off against each other – instead of feeling they need to pay whatever price they are offered to secure space. As the balance of negotiating power starts to swing back towards shippers, we should see spot rates start to come back down.
… explained Emily Stausbøll
The clearest indication of a peak being reached is found in the Xeneta market ‘mid-high’ data, which identifies the spot rates being paid by shippers in the 75th percentile of the market. On the trades from the Far East into US, the market mid-high (and high) spot rates have remained almost flat during July, indicating the high end of the market is no longer spiralling.
Stausbøll mentioned that a flat market mid-high signifies that an increasing number of shippers and freight forwarders no longer feel compelled to pay spot rates at the higher end of the market to ensure their containers are transported. She observed that this situation marks the first sign of change because carriers are no longer dictating which containers to load; instead, they have to lower rates to secure volumes. To compete and retain market share, these carriers need to reduce their prices.
The market is also peaking on fronthaul trades from the Far East to North Europe and the Mediterranean, where average spot rates increased by 4.7% and 3.5% on 15 July, reaching USD 8,480 per FEU and USD 8,150 per FEU respectively, which is lower than the increases of 17% and 10% on 1 July.
Stausbøll indicated that it has been a difficult period for shippers, who have been forced to pay escalating spot rates and faced the risk of being unable to ship their cargo under existing long-term contracts. She stated that signs of the spot market reaching a peak would be welcomed by shippers, but it does not mean an end to their troubles.
With port congestion easing, more ocean container shipping capacity becoming available, and the possibility of a less intense traditional Q3 peak season due to earlier frontloading of imports, the situation might improve. However, spot rates remain significantly elevated, being up nearly 400% from the Far East to the US West Coast since mid-December last year, more than 300% to the US East Coast, and 455% to North Europe. While the market might have peaked, shippers are still incurring substantial costs.
Stausbøll attributed the fundamental cause of the market spike in 2024 to the conflict in the Red Sea, which has led the majority of container ships to sail around the Cape of Good Hope. Unless there is a significant return of container ships to the Suez Canal, which seems unlikely at present, the situation cannot be fully resolved.
Nonetheless, the Xeneta Senior Shipping Analyst noted that it is possible for the spot market to soften while the Red Sea diversions are in place, as seen during March and April, which is what shippers hope for in the remainder of 2024.
