Ocean Market News By Xeneta
April 9, 2024
Market News by Xeneta April 9, 2024
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The Xeneta Ocean iXRT provides an overview of market movements, the key risks and issues to be aware of and insight on how these may develop in the coming weeks and months. Xeneta also publishes an iXRT report dedicated to the air freight shipping market, with the latest edition available here.
Topics covered in this edition of the iXRT Ocean include:
Strong volume growth in 2024.
Spot rates stabilize and carriers look to GRIs.
Baltimore bridge collapse does not trigger rates increase.
Increase in transits at Panama Canal.
CMA CGM partially returns to Red Sea.
Competitive tender rates coming in below last year's levels.
US West Coast regaining market share of imports.
Alliance shake-up adds uncertainty.
OCEAN RECAP
The latest data on container shipping volumes show continued strong growth. In the first two months of 2024, 27.8m TEU have been moved globally, 10.7% up from the same period last year.
Though this high growth is largely due to low demand at the start of 2023, it is still 105 400 TEU higher than the first two months of 2021, and up by 8.1% from 2019.
Following months of decline, spot rates from the Far East into the Mediterranean and North Europe seem to have stabilized, even recording a slight uptick in April.
Several carriers have announced General Rate Increases (GRIs) on Far East to Europe trades from mid-April, but there is a substantial spread between them.
For example, from the Far East into North Europe, CMA CGM is looking for USD 4 000 per FEU while Hapag Lloyd comes in at USD 3 000.
On 8 April the average spot rate between the Far East and North Europe stood at USD 3 330, which suggests Hapag Lloyd’s mid-April GRI is less an attempt to increase rates, but rather stop the decline.
From the Far East into the Mediterranean, MSC comes out highest with a GRI up to USD 4 800 per FEU into the West Mediterranean and USD 5 100 to Black Sea Ports.
On these trades CMA CGM has announced FAK rates of USD 4 200 and USD 4 400 respectively.
Similarly to the Far East to North Europe trades, Hapag-Lloyd’s announced rates into the Mediterranean are lower than other carriers.
However, unlike the trade into North Europe, the announced rate into Mediterranean of USD 3 700 per FEU is higher than the current spot market average, which stands at USD 3 460 per FEU.
Spot rates from the Far East into the US have been declining since they reached a peak earlier this year following the escalation of conflict in the Red Sea in December.
However, this decline has slowed with rates on 8 April only slightly down from the end of March.
The collapse of the Francis Scott Key Bridge in Baltimore on 26 March has caused supply chain disruption on the US East Coast.
While Baltimore is an important port, it is much smaller than some of its neighboring ports when it comes to throughput of containers.
In 2023, Baltimore handled 1.1m TEU in total, compared to the 7.8m TEU in the port of New York/New Jersey and 3.3m TEU in the Port of Virginia.
Furthermore, almost all of the ocean freight container services with stops in Baltimore already have scheduled port calls at either one or both of the major neighboring ports.
This will limit the direct impact on container shipping, with problems mainly arising for inland transport due to importers having to get their containers into or out of a different port than they originally planned for.
There has been no discernible impact on freight rates into Baltimore as a result of the incident.
Average spot rates from the Far East into the US North East Coast (including Baltimore) have fallen slightly (-1%) since the bridge collapse on 26 March to stand at USD 5420 per FEU.
When including other US East Coast ports such as New York / New Jersey, rates from the Far East have decreased by 3% in the same period.
Average spot rates from North Europe to the US North East Coast have fallen by a larger 8% in the same period to stand at USD 2360 per FEU. When including other US East Coast ports, rates have decreased by 4%.
On Friday, 5 April, the Port of Baltimore issued an update stating it expects to open a 280-feet wide and 35-feet deep federal navigation channel by the end of April, followed by a reopening of the permanent 700-feet wide and 50-feet deep channel by the end of May, restoring port access to normal capacity.
OCEAN OBSERVATION
The ongoing avoidance of the Red Sea and Suez Canal by most ocean freight shipping services and the restrictions on transits through the Panama Canal continue to plague trades from the Far East into Europe and US East Coast.
However, there was a positive development at the end of March after the Panama Canal Authority announced an increase in the number of daily transits from 24 to 27.
This is still down from the 36 transits which was the norm before low water levels in the Gatun Lake brought restrictions.
Even so, this news has triggered some carriers to announce a return to the Panama Canal, which will greatly reduce transit times.
For example, Maersk has announced its OC1 service will return to its pre-existing rotation through the Panama Canal effective from 10 May.
This will also see the phasing out of the “two-loop” set-up which utilized the Panama Rail connection.
However, a further increase in daily transits will be at the mercy of the projected rainfall materializing in the coming weeks, otherwise water levels will remain at risk of being too low for the number of transits to increase.
When it comes to the situation in the Red Sea, CMA CGM has announced a return to the region, and vessel tracking data does indeed show a few of its ships transiting the Suez Canal, however it is still sending plenty of ships around the Cape of Good Hope.
Shippers already have a lot to contend with due to issues in Panama, the Red Sea and Baltimore and there is another disruption looming in the form of labor disputes at US East and Gulf Coast ports.
The International Longshoremen’s Association’s six-year contract with the United States Maritime Alliance, which represents port terminal operators and ocean carriers on the East Coast, expires on 31 September – and no new agreement has yet been reached.
In the past these negotiations have run more smoothly compared to those on the US West Coast, but tensions appear heightened this year and the threat of walkouts or other work stoppages are on many shippers’ minds.
Common to all these issues (Panama, Red Sea, Baltimore and labor disputes) is that they don’t directly affect imports from the Far East into the US West Coast and, as a result, more shippers are returning volumes to the US West Coast.
US container imports as a whole have been strong at the start of 2024, with both the East and West coasts seeing a large increase in volumes.
However, the US West Coast is regaining some of the market share it lost over the past few years following the severe disruption during Covid-19 which saw many shippers head East.
In the first two months of 2024, imports into the US West Coast have grown by 25.7% while those to the US East Coast are up by 14.8% (source: CTS).
The softening spot market into the US comes at a critical time for many tender negotiations, with early anecdotal evidence suggesting that new long term contract rates are coming in under last year’s levels.
This is despite the spot market still being considerably higher across major trades from the Far East and North Europe into the US compared to 12 months ago.
Compared to the same day a year ago, the average spot rate from the Far East to the US West Coast on 8 April 2024 is 179.4% higher, increasing from USD 1 250 per FEU to USD 3 490 per FEU.
As is the case on other trades, long term rates from the Far East to US West Coast have not followed the spot market increase, with the average of all long term contracts entering validity in the past three months down by 14.3% from a year ago.
The gap between long and short term rates suggests spot rates will fall further as few shippers will want to ship on the more expensive spot market unless absolutely necessary.
These tender rates for new long term contracts align with the Xeneta Outlook 2024, published last October, which suggested overcapacity of supply would limit carriers’ opportunity to drive profits.
Even though most carriers are still avoiding the Red Sea and thereby increase the ton-mile demand (the average sailing distance per ton of cargo), carriers appear to be prioritizing securing long term volume commitments from shippers over increasing freight rates.
Changing alliances is another topic that is top of mind for many shippers during negotiations for new long term contracts.
Any 12-month contract signed now will be valid past the end of the 2M alliance in January 2025 and therefore will be serviced by the new alliance structure.
This will see MSC operating outside an alliance, Hapag-Lloyd and Maersk forming the new Gemini Alliance and the remaining THE Alliance members having to adjust to their much lower market share following Hapag-Lloyd’s departure.
There is also still very little concrete information on the Gemini Alliance, which will operate from February next year.
No doubt this will be adding to the uncertainty around what alliances and carriers are offering during negotiations and how this may change if/when there is a widespread return to Red Sea and Suez Canal transits.
OCEAN OUTLOOK
Xeneta is the leading ocean and air freight rate benchmarking, market analytics platform and ocean container rate index, Xeneta Shipping Index (XSI®).
Xeneta’s powerful reporting and analytics platform and data density provide liner-shipping stakeholders the insights they need to understand current and historical market behavior – reporting live on market average and low/high movements for both short and long-term contracts.
Xeneta’s data is comprised of over +450 million contracted container rates and covers over 160,000 global trade routes. Xeneta is a privately held company with headquarters in Oslo, Norway and regional offices in New York and Hamburg. To learn more, please visit www.xeneta.com
NOTE: The XSI® public indices reports are based on long-term contracts only.
© 2024 Xeneta AS
Quarterly Market Average, 40' Container
Monthly Market Average, 40' Container
Quarterly Market Average, 40' Reefer HC
