At Xeneta, we offer our customers exclusive access to the most accurate and unbiased ocean and air freight market data in many shapes and forms to help our customers stay one step ahead. As this is the season to welcome the new year on a high note, we're excited to share with you one of our exclusive ocean freight market analysis reports, the Xeneta Ocean Deep Dive (XODD).
This report contains Xeneta's exclusive insights for the full ocean freight pricing and supply transparency that will help you to improve your ocean freight procurement process dramatically. XODD is a quarterly report created by our ocean freight market experts for Xeneta customers only. It consists of a market commentary on the current state of the ocean freight market.
In this year's final edition, our ocean market experts give an in-depth look at how trends like continuously falling short and long-term rates and slow global economic growth will impact the ocean freight market in 2023.
Key highlights from the report
- Impacts of falling demand and increasing supply due to new deliveries and lower congestion.
- Long-term rates are now falling, but are they low enough to make shippers want to secure long-term contracts?
- How will blanked sailings evolve as rates close in on carriers’ breakeven point?
- The effects that stunted economic growth, zero-Covid and cost of living will have on volumes and beyond.
NOTE: If you are a Xeneta customer, you can access the report directly from the Xeneta customer community.
Rates
The big question for many as we enter another turbulent year in container shipping is where long-term rates are headed. The question is relevant given their importance to the overall spending in container shipping and the collapse we have seen on the spot market.
Average rates for all valid long-term contracts are coming down, as reflected by the largest month-on-month decline in November's global XSI® for the contract market.
The index is still considerably higher than it was a year ago. The average rates are still lower than last year on many trades, considering all the newly signed long-term contracts.
The average long-term rate for contracts starting in Q4 this year on Xeneta's top 13 trades is down by 7.4% compared to Q4 2021 and lower than any other quarter in 2022.
However, this recent decline still leaves long-term rates considerably higher than what shippers can get on the spot market. This leaves plenty of room for long-term rates to fall further. Read more.
Demand
In the first ten months of the year, global container volumes fell by 3.0%, according to Container Trade Statistics (CTS). Though accumulated volumes have been down year on year since February, the pace of decline has accelerated in recent months.
September and October are the first months in which volumes are lower than in the corresponding month of 2019 since July 2020. Year-to-date global container volumes are still higher than in 2019, but only by 2.5%.
Even if we do not consider the ups and downs of the past two years, demand growth of only 2.5% over three years is considerably lower than the trend growth experienced before the pandemic.
Real demand for container transportation work is falling faster than volumes would suggest, as the average distance from which containers are moved is also falling.
Real demand for container transportation work is falling faster than volumes would suggest, as the average distance from which containers are moved is also falling.
By splitting global demand into two groups, intra and inter-regional volumes, it is clear how the average haul is falling. Volumes on the longer distance inter-regional trades have fallen by 4.1% in the first ten months of this year compared to 2021. Compared to 2019, container volumes on these trades are up by a measly 1.0%. Read more.
Reefer Rates & Demand
Reefer volumes year to date are down by 1.6%, less than 1m TEU moved in September and October, but not significantly different from last year. There are more nuances than with dry containers as to how demand for trade types is developing.
The biggest trade, intra-Asia, has grown by 1.7%, but so have several of the large long-haul trades. For example, from South America to the Far East, volumes have risen by 17.3% in the first ten months of the year than in 2021. In contrast, exports from South America to Europe have fallen by 8.3%.
Supply
In 2021, the available capacity for most of the year was lower than in 2019 due to the capacity being stuck in congestion.
So, as congestion eases, the available capacity is now rising in 2022. Compared to October 2019, the available capacity is up by 6.2%, whereas in October 2021, it was down by 4.0% from October 2019.
The nominal and available fleets are set to increase as the huge amount of new tonnage ordered since Q4 2020 is delivered at an increasing pace through 2023 and 2024. Xeneta expects 1.7m TEU to be delivered in 2023 and 2.5m more in 2024, levels which also reflect Xeneta's expectations for slippage (delaying a delivery) and cancellations. Read more.
Macro
These days a lot of focus is rightly placed on developments in China and the recent easing of its zero-COVID policies after protests, including the existing damage to the economy.
The IMF expects the Chinese economy to grow at its slowest pace in around three decades this year.
In the first three quarters of the year, the Chinese economy grew by 3.0% from 2021 (Source: National Bureau of Statistics China). It's unlikely to be any better in Q4 2022.
The rolling back of the zero-COVID policy will stimulate economic activity and reduce uncertainty, although this is likely to be held back should the case numbers spiral.
Internally, domestic consumption is down year-on-year, taking a hit from lower consumer confidence.
In October, retail sales of consumer goods fell by 0.5% year-on-year, and retail sales have grown by just 0.6% year-to-date. In 2021 Chinese retail sales rose by 12.5%. This development is having a big impact on intra-Asian business.
Download our exclusive report to avoid spending countless hours deciphering shipping market news.
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