Despite increased use of slow steaming to take out capacity, ocean container carriers continue to see demand and rates head south. (See Ocean Carriers bring Back Super Slow-Steaming to Hide Impact of New Ship Deliveries.)

Supply Chain Digest Says...   The analysts at Alphaliner recently noted that “On the cargo front, the news remains grim, with continued depressed rates and volumes on many key routes.     What do you say?   Click here to send us your comments       Click here to see reader feedback

Maritime analytics firm Xeneta’s index of rates is down by 42% year-over-year, with May marking the ninth consecutive month of rate decline.

And long-term rates fell 27.5% last month alone – leading Xeneta CEO Patrik Berglund to say that “collapse” was the only appropriate descriptive word, according to TheLoadStar web site.

Berglund added that “This is the largest drop we’ve ever experienced on the XSI, (Xenata’s monthly report) which charts real-time global rates developments, and it paints a bleak picture of the state of the industry.”

Berglund continued, adding that “The main driver is the fact that May marks the point when 12-month contracts in the US come to a conclusion and new agreements come into force. These reflect the reality of today’s subdued markets, so are priced much, much lower than their predecessors.”

Xenata added that the evidence is clear that that the era of high demand, lack of equipment, disrupted supply chains, and congestion in container shipping is over.

In the report, Berglund further stated that “If industry observers were left wondering just how bad it could get for carriers after the 10% fall in long-term rates seen in April, here’s the answer: Monthly declines have become the ‘new normal’ at present, but this is a collapse."

While all the global markets showed weakness, Xeneta reported that the US import index collapsed by just over 40% in May and has now lost 54.6% of its value since peaking in October last year. In dollar terms, Xeneta equates this to the average contracted price of shipping containers between the Far East and the US West Coast falling by $6,140 per forty-foot equivalent year-on-year (a 76% decline).

(See More Below)

Meanwhile, technology company FourKites is reporting congestion in Chinese ports, the main contributing factor in last year’s sky-high charter rates, is down 62% versus 2022.

Along similar lines, the analysts at Alphaliner recently noted that “On the cargo front, the news remains grim, with continued depressed rates and volumes on many key routes. Carriers are, one after another, announcing fast-deteriorating financial results for the first few months of the year, with at least two seeing the return of red figures.”

And the carriers are largely powerless to stop the decline.

“This is very worrying for carriers, who are working overtime to manage capacity - adjusting vessel speeds, restructuring services, and blanking sailings - and all to no avail,” said Berglund. “There’s very little the carriers can do to protect their precious long-term rates in this kind of climate, especially when we consider that the vessels ordered during the pandemic ‘boom’ are now starting to swell overall industry capacity.”

What are your thoughts on ocean rates? Let us know your thoughts at the Feedback section below.

Your Comments/Feedback