May 2023 witnessed an unprecedented decline in container rates, as the global Xeneta Shipping Index (XSI®) recorded its largest-ever month-on-month drop of 27.5%. This slump marks the ninth consecutive month of rate decreases, resulting in the lowest XSI® level since October 2021.
US Contracts Drive Market Down
The market downturn can be attributed to the conclusion of existing 12-month contracts in the US, leading to the implementation of new agreements that reflect the current subdued market conditions. As a result, long-term rates have plummeted, causing a significant financial challenge for carriers who had relied on higher rates to offset recent spot rate losses.
Europe: Imports and Exports Affected
European imports experienced a substantial decline, with May's XSI® for European imports dropping by 11.1% since April and 32.6% since the beginning of 2023. Similarly, European exports saw a 15.9% decrease, primarily influenced by trades with the US. Long-term rates in Europe have been aligning with spot rates, with recently signed contracts between the Far East and the Mediterranean being $250 per FEU cheaper than spot market rates.
Far East: Export Downturn Persists
The Far East exports have been hit hard, with May's XSI® for Far East exports falling by 38.6%. This represents a decline of more than half compared to the end of the previous year. Compared to May 2022 the XSI® for Far East exports has fallen by 58.5%. Despite the lifting of China's COVID-19 restrictions, diminishing demand for Far East exports worldwide has impeded any significant volume growth. Containerized exports from the Far East declined by 10.5% in Q1, indicating a minimal increase since Q1 2019.
US Imports: A Major Driver of the XSI®Decline
The most significant contributor to the global XSI® drop is the sub-index for US imports, which experienced a massive 40.6% decrease from April to May. Long-term contracts between the Far East and the US West Coast have witnessed a staggering 76% reduction in average prices compared to the previous year. Total imports into North America have decreased by 21.1% in Q1, with Far East imports falling by 25.9%.
Note: Xeneta's XSI® is compiled from the latest crowd-sourced ocean freight rate data aggregated worldwide. Companies participating in the benchmarking and market analytics platform include names such as ABB, Electrolux, Continental, Unilever, Nestle, L'Oréal, Thyssenkrupp, Volvo Group and John Deere, amongst others.
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