The warning signs were already there, but the latest data from Oslo’s Xeneta suggests 2024 could be even more brutal than expected for carriers in the ocean freight shipping market.
The Xeneta Shipping Index (XSI®) fell by a further 4.1% in November to stand at 158.5 points. This is 62.3% lower than November 2022.
Emily Stausbøll, Xeneta Market Analyst, said: “The XSI® is an average of all long term contracts on the market – so in essence the global index is currently being propped up by those older contracts which were signed back in 2022 when rates were much higher.
“These older contracts with higher rates should have afforded some financial insulation throughout 2023, however we have still seen four of the major carriers post big financial losses in Q3.”
Stausbøll stated the situation will get even worse as we enter 2024.
She said: “Those older contracts will largely be replaced in the early part of next year and carriers will be left exposed to the current weak market.
“If carriers are already reporting losses, what are they going to be next year? We could be talking about extremely big numbers.”
Stausbøll pointed to Maersk’s loss of EBIT USD 27m in Q3 as a significant development in light of the latest XSI® figures.
She said: “Maersk relies heavily on the long term market so they should have been less impacted by the collapse in spot rates during 2023.
“The fact they still posted a loss in Q3 suggests there could be serious problems down the line when the XSI® drops further next year.
“We always knew there was a storm coming in Q1 2024 when the older contracts expired, but it seems as though it has arrived earlier than expected.
“The only way carriers can hope to avoid catastrophic financial losses in 2024 will be through capacity management, but it will be extremely tough to achieve.”
The XSI® paints a gloomy picture for carriers at a global level, but let’s take a look at how the index fares across the regions…
Europe
The XSI® for European imports posted a 5.7% decrease in November leaving the index at 176.6 points. This is the XSI® sub-index with the biggest month-on-month decrease in November.
Imports into North Europe are down by 2.7% in the first nine months of the year, whereas Mediterranean imports have increased by 19.9% in the same period.
Despite this, the average of all valid long term rates on the major trade from the Far East into the Mediterranean has still fallen by 70% compared to a year ago. This is only marginally better than the 75% drop in rates between the Far East and North Europe.
Exports out of Europe also continued to decline in November, down 2.4% to leave the index at 160.3 points and 58.3% lower than November 2022.
Far East
November has brought a 2.6% drop in the XSI® for Far East exports, leaving it at 148.9 points. The average cost of shipping a container out of the Far East on the long term market is now 17.7% higher than November 2022.
While the XSI® has fallen, another month of record-high exports out of the Far East has brought accumulated year-to-date volumes into positive territory for the first time this year when compared to 2022.
US
The XSI® for imports into the US has maintained its position as the highest scoring sub-index at 182.1 points, albeit 2.5% lower than October. Successful capacity management on the hugely-important Far East to US West Coast trade has proved to be critical for carriers in protecting freight rates.
With volumes now recovering, carriers’ capacity management is being rewarded through a marginal year-on-year increase in spot rates. It stands out as the only major trade to see spot rates up compared to November 2022.
The XSI® for US exports posted the smallest month-on-month decrease in November, falling by just 0.4% to 131.1 points.
Get the full XSI® report here.
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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