Freight rates elevated more than 90% in one year
However, "there is little evidence to suggest a weakening of market fundamentals, meaning there could be more pain in store for shippers with colossal profits looming for carriers," noted Xeneta, the freight rate benchmarking and market intelligence platform.
"This year has seen a unique convergence of Covid-19 disruption, port congestion, strong demand and maxed-out capacity, and that has stoked the flames of record-breaking rates," explained the CEO of the Oslo-based company, Patrik Berglund.
"It’s a crazy market out there", he pointed out, as the global supply chain is under immense pressure and shippers have no choice but to pay up to secure deliveries, or at least try to, ahead of key trading periods such as Christmas.
As a result, the vast majority of the shipping lines have benefitted from high freight rates and increased container demand, reporting record financial results and strong forecasts for the upcoming period.
Representative cases are the almost ten times increased Hapag-Lloyd's profit during the first half of the year and CMA CGM's EBITDA surge in the second quarter. In the meantime, Maersk has recently revised its annual forecast, expecting an EBITDA of US$22-23 billion from US$8.5-10.5 billion.
According to Xeneta analysis, shippers are trying new strategies to avoid one-sided negotiations and retake a sense of control. There are several large companies, such as IKEA and Home Depot, which are chartering their own ships to face supply chain difficulties and control skyrocketing cost.
"This is a direct response to a market in overdrive, but one wonders if this type of approach could signify a new way of working, in the long-term, for shippers sick of being held to ransom," said Berglund.
For the time being, however, Xeneta believes that carriers seem to have control of the situation with a growth of 7-8% in box volumes being anticipated and around 400 newbuild container vessels having been ordered so far in 2021.
Amid such an unstable situation, shipping lines are trying to secure elevated rates by locking customers into more long-term contracts and hedge future revenue, or even offering multi-year deals with the benefits of additional volume options or stable, guaranteed shipments, according to the analytics platform.
Another change of approach is exemplified by CMA CGM’s recent move to freeze spot rate increases from now through to February. "However, with rates already so high there’ll no doubt be many shippers viewing this as 'crumbs from the rich man’s table'," commented the CEO of Xeneta and doubted "if any freezes do take hold within the broader carrier community."
The latest XSI report, which is based on crowd sourced real-time rates from leading shippers, delivers a regional breakdown of market fortunes for key trades.
In particular, European imports rose by 3.9% in September, indicating that the benchmark has appreciated 132.5% year-on-year. Exports have also increased by 1.3%, reaching 51.7% higher than the same period of last year.
As for the Far East, imports fell for the first time since March, but only by 0.7%. This still forms the index elevated by 49.8% over the previous year. Exports continued the uptrend, with rates increased by 5.1%, and up by 126.8% against September 2020.
Additionally, in the United States imports had a slight increase of 0.6%, although strong recent growth leaves the benchmark 67.3% up year-on-year. Exports grew by the same margin, with the index now a (relatively modest) 20.7% up, compared to the same period of 2020.
In the meantime, port congestion remains high, especially in key hubs such as Los Angeles, Long Beach, New York and Hamburg, and equipment is in short supply. "Seen against strong pre-festive season demand, and stubbornly high spot rates, it’s difficult to see much relief on the horizon for shippers," claimed Berglund, who concluded, "It’s a tough market out there… and probably will be for some time to come."
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