XSI® Global
Bigger changes in the XSI® are likely to come in the new year when new contracts are signed
September saw global rates on the XSI® increase for the first time in 12 months, raising the question of whether this was a sign of a resurging market or merely a temporary halt in its decline.
This week Xeneta has released its latest XSI® figures for October which show the upward tick in September was indeed a false dawn as the index once again reverted to the downward trend we have seen over the past year.
While the 0.2% increase in September was slender, it was still a welcome sign for carriers of the tide potentially starting to turn in their favor. However, this respite proved short-lived as October saw the Global XSI® drop by 2.6% to 165.3 points.
The latest figures must also be put into the context of timing, with Q4 traditionally seeing far fewer new contracts entering validity when compared to Q1.
With a smaller number of new contracts we should not expect to see any significant changes to the Global XSI® in either an upward or downward trajectory.
For this reason, the biggest changes in Global XSI® is likely to come in the New Year when more contracts are signed, most likely at lower rates than the contracts they are replacing. For example, last year the index fell by 0.6% in October, while in January it fell by 14.7%. This was then followed by an even bigger drop in May when it fell by 27.5%, driven by the large number of new contracts with shippers in the US.
However, we should not expect changes in the XSI® to follow the exact same profile as last year, simply because the latest contracts are being negotiated in a very different environment. January is likely to see a similar or even bigger decrease as 2022, but May will likely see a less severe decrease as the previous year.
This is because when contracts due to expire in December 2023 were negotiated, the market sentiment was very different to when contracts due to expire in April 2024 were negotiated.
This is the result of the December and April contracts being negotiated either side of the severe drop in spot rates witnessed in Q1 2022.
At the end of October 2022, the average of all valid long-term contracts into the US West Coast was three times higher than the spot rate. This prepared the ground for big drops in the XSI® for US imports. In contrast, spot rates into Europe were less than twice as high as long term rates.
Today, this situation has flipped with spot rates 9.6% lower than long term into the US West Coast while being 51.4% lower into North Europe.
“Knowledge is power when entering negotiations, so shippers should be armed with the latest data and intelligence in the Xeneta platform to understand the long-term XSI® trajectory.”
