XSI® Global
As we prepare to leave 2023 behind, the Global XSI® stands at 157.8 points in December, which is 62.4% lower than the start of year.
The Xeneta XSI® resembles a game of snakes and ladders, just when you think rates have climbed to the top of the board they tumble back down again, only to begin another risky ascent.
If we look to 2021 and 2022 for comparison, the XSI®, which represents the average of all valid long term contracts, increased by 117.6% and 69.8% respectively. The drop in 2023 wipes out those gains, with the Global XSI® now 90 index points lower than the end of 2021.
However, if we look back a little further in time, the XSI® still ends 2023 38.9% higher than it was at the end of 2020.
If we look at the development of the XSI® on a month-to-month basis, December’s result was just 0.4% lower than November. The magnitude of the month-on-month changes in the XSI® has shrunk towards the end of this year with the past four months ranging from +0.3% to -4.1%.
This slowdown in month-on-month declines coincides with a pick-up in global container volumes. Indeed, August was the first month of 2023 in which volumes were higher than last year – a feat repeated in September and October. In fact, given the low volumes shipped at the end of 2022, it looks increasingly likely that volumes in 2023 will be flat on last year.
However, the smaller falls in the XSI® are more likely explained by the lower number of new long term contracts entering into force rather than by higher volumes. The biggest month-on-month changes in the XSI® in 2023 came at the start of Q1 (-14.8% in January), at the start of Q2 (-10.3% in April) and in May (-27.5%), when many new contracts for US shippers commenced.
We expect a similar pattern in 2024, though recent developments may disrupt that outlook.
The unpredictability of the ocean freight shipping market was on full display this week following the missile attacks in the Red Sea and Gulf of Aden.
The announcement of many carriers sailing around Africa rather than using the Suez Canal, means substantial amounts of additional capacity will be needed to maintain service schedules.
The Far East to North Europe trade alone will require an additional one million TEU if all ships on the trade are re-routed via the Cape of Good Hope. This trip around Africa will see carriers avoid hefty fees for transiting the Suez Canal but incur higher fuel costs.
This will put a dent in the market's overcapacity of supply, putting downward pressure on rates in 2024.
