Contract freight rates continue to surge

Shippers hoping that longer-term contracts would protect them from the vicissitudes of the spot market have had their hopes dashed as long-term rates surged by a third in July alone.

Figures from freight rate benchmarking platform Xeneta show a 28.1% rise in its long-term index in the past month. The benchmark now stands 78.2% higher than in July 2020 and is up 76.4% from the beginning of this year.

The increase was driven by European imports, which spiked almost 50% to $13,000 per feu, with imports now a “towering” 120% over the past year’s figure. Export rates also recorded their largest-ever monthly increase, although by a more modest 16%, and up 39.8% since July 2020. The Asian index was up by a quarter, while US imports reflected another all-time high after a 17% rise.

However, bear in mind that volume flexibility is totally gone, with shippers committing to maximum quantities to secure positions on board. Furthermore, all around the world, but especially in the US, shippers are playing safe and building buffer agreements to ensure they are covered for the holiday season.

The glut of new buildings ordered in the first half of the year would have little impact on conditions as the lead times for these would mean little relief until 2023.

For the time being, however, the fundamentals favoured the carriers, as had been demonstrated in the second-quarter results from major container lines already published.

Meanwhile, on the short-term market, spot rates assessed by Xeneta were also on the rise. Asia-northern Europe average rates had risen by 700% since last August to close to $14,000 per feu. Long-term rates for the months ahead were already being pushed up further on the back of these high spot rates.

Source: Lloyd's List, 05 August 2021