Long term container shipping rates move up, spot rates decline

Ocean freight container shipping spot rates have increased dramatically in recent months but the long term market has been insulated from the volatility in comparison, perhaps until now, according to the latest update from Xeneta.

"The Xeneta Shipping Index (XSI), which covers all valid long term contracts in the market, reached 151.5 points in July. While this is still four percent lower than December last year, it represents a month-on-month increase of 2.5 percent from June.

"The underlying XSI sub-index for Far East exports – which includes the world’s biggest fronthaul trades to Europe and the U.S. - increased 12.6 percent in July to 178.8 points.

This coincides with short term rates on major trades from the Far East to the U.S. and Europe beginning to soften in July from the massive increases seen over recent months, the update added.

“Long term ocean container shipping rates remained subdued despite massive increases on the short term market in May and June but that is starting to change," says Emily Stausbøll, Senior Shipping Analyst, Xeneta.

With long term rates on major fronthaul trades now starting to increase while short term rates are softening, the narrowing in the short-long market spread raises a key question – how high will long term rates rise before growth is stunted by declines in the short term market?

“This is a pivotal time for the market," says Stausbøll. "Shippers will be hoping the spot market crashes back down hard and fast while carriers will be doing everything possible to keep short term rates elevated for as long as possible.”

Long term shipping rates on the major fronthauls from the Far East to Europe and the U.S. may now be showing signs of upward pressure but the backhaul trades remain subdued in July, the update added.