Gentle demand pushes ocean spot prices to ‘lowest sustainable level’ Ship’s crew

From Nick Savvides (The Loading Star) –

According to the latest report from Maritime Strategies International (MSI), weak demand in the big three ocean trades combined with the expected flood of new tonnage will result in falling rates.

And ONE CEO Jeremy Nixon said today: “Demand in the last quarter (Q1 23) was significantly weaker than in the first calendar quarters of the previous two years.”

However, he added that this was not unexpected “as the Covid 2022 recovery cycle brought with it strong consumer goods inventory building programmes”.

While Mr. Nixon believes there has been an over-correction affecting sales and inventories, ONE doesn’t expect any signs of a recovery before June or July.

MSI’s report describes spot rates as “at their lowest sustainable levels” but they are stable while contract terms for many are still being negotiated and “there is further room for weakening in terms of contract freight rates.”

Meanwhile, the Drewry WCI composite index was down 2% week-on-week to $1,740.26 per 40 feet, down 78% from the same week last year.

Fares from Shanghai to Rotterdam and Los Angeles fell 1% and 2%, respectively, and Rotterdam to New York also fell 2%.

Xeneta’s take on deals was brutal, suggesting that the shipping industry “had a hot spell in April,” with long-term rates falling 10.6%.

“A series of renegotiated contracts, with prices reflecting low market demand and high capacity, pulled rates down across the board – with all regional trade lanes reporting monthly declines,” Xeneta added.

Its XSI Shows rates in all trades are down 13.6% this year, with CEO Patrik Berglund adding: “This is now the eighth straight month of declines and certainly one of the most notable at over 10%.

“March’s decline of just 0.5% was somewhat misleading. It was basically the calm before the storm, with new contracts at significantly lower prices waiting to go into effect in April. We can now see the dramatic effects of that.”

Mr Berglund believes shippers are “in a difficult position” as demand has been impacted by economic and geopolitical factors that have put shippers “in the driver’s seat” during negotiations.

“To demonstrate the fundamental shift in market sentiment here, they (contract rates) are up 118.5% between April 2021 and April 2022. So, with fundamentals remaining weak, year-on-year growth is unlikely to be sustained much longer. We can very likely expect further declines.”

According to Xeneta XSI, U.S. imports posted the smallest monthly decline of any index, down 1.5%. But Mr Berglund said: “However, with May 1st approaching as the date when a number of new contracts will come into force, this slight postponement may obscure true long-term contract reality.”

European imports posted their biggest drop ever, according to Xeneta, with long-term interest rates falling 19.5% month-on-month. Exports fared only slightly better, with the sub-index losing 15.8%.

(c) Copyright Thomson Reuters 2023.

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