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Normalization of the rates spot of the containerized marine transport would be given only in May 2023

Although the trend is markedly decreasing, the rate of decline is too low.


July generally marks the peak of the container shipping season. However, decreasing spot (short-term) rates continue to be observed. As an example, the global weekly FBX index decreased by 7% during July and has dropped by 37% compared to the peak associated with the Chinese New Year. On the other hand, new indications from the spot tariffs of the Drewry World Container Index (WCI) show that tariff levels continue to fall, with an overall index showing a decline for 23 consecutive weeks.

According to maritime industry analyst Lars Jensen, «the initial period of falls could be fully explained by the normal seasonal fall after the Chinese New Year, but we have long since deviated from that seasonality curve», notes in reference to the Drewry data that «compared to the median curve of normal seasonality, tariffs have now dropped 22% on the Asia-North Europe route and 26% on the Asia-USWC route».

For Jensen, while such reductions in tariffs at first glance may give the impression that tariff levels are rapidly approaching pre-pandemic normalcy, this is not the case, as he notes, rates remain extremely high by historical standards. In fact, it highlights that «the level at the end of July 2022 remains 350% higher than in the same period of 2019 before the pandemic, although of course it recognizes that developments vary according to specific maritime routes.

But what does all this mean?

For the analyst this decrease below seasonality indicates that «the strength of the market is now much lower compared to early 2022». So far a relief for the beneficiaries of the burden. However, there is a «but», since the rate of decline is quite modest and would only imply «a complete reversal to a semblance of normalcy until well after the start of 2023».

Looking at the FBX data, Jensen points out that it reached an absolute peak in September 2021 at a rate of US$11,109/FEU. Since then, the index has declined to US$6,120/FEU (the level in 2019 fluctuated between approximately US$1,250 and US$1,600, depending on the time of year.

Then, the period from September 2021 to the end of July 2022 has seen an average decrease of 500 points per month. «If this decline continues at the same pace, spot rates would still take another 9-10 months before reaching pre-pandemic normalcy, which would be around May 2023,» Jensen projects.

Contract rates also have an impact

However, Jensen argues that the influence of contract tariffs (long term) should also be considered in this development.

According to him, in 2021, some beneficiaries of the load, especially the largest ones, moved cargo to contracts agreed at the beginning of the year, which generated a big difference between spot and contract rates in the high season of 2021. Thus, at the beginning of this year, the new contract rates increased substantially, while spot rates were beginning to fall from their historic highs.

As Jensen describes, «the current situation is that spot rates are increasingly seen above spot rates, which will generate challenges in the relationship between shippers and shipping lines».

The analyst explains that historically, many contracts between both parties have been de facto inapplicable when spot and contract rates have become too misaligned. «We note this clearly in 2020-2021 when spot rates exceeded contract rates by a wide margin and some cargo beneficiaries were unable to move the volumes agreed in their long-term contracts».

According to Jensen, the same pattern is increasingly likely to be observed, but vice versa, as spot rates continue to decline below contractual rates.

What’s left to see?

According to the analyst, the main «joker» against this downward trend in spot tariffs is the impact of the continuing widespread congestion problems in ports and terminals, as well as in inland transport in the world.

According to him, this type of disruption «has the effect of removing large quantities of capacity from the market, while a worsening of the situation could cause a temporary increase in tariff levels (spot) once again».

A factor that can worsen management are labor conflicts, where for the time being you can glimpse a greater potential for conflict in Europe, compared to what happens at the USWC, where apparently it is quite moderate, since the negotiating parties maintain a normal working environment despite having exceeded the initial deadline.



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