Shipping article(s)
January 14, 2022
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The costs of shipping this year  will be "higher than ever before" even if spot rates soften, according to the latest comment made by Xeneta chief analyst, Peter Sand.


Sand, who is former chief shipping analyst at BIMCO, said in his weekly rates update that the new year has not brought much more relief to the container shipping market, especially on the main fronthaul trades. 


He noted that container lines' strong position in negotiations for long term rates as well as the inclination of shippers to lock in capacity which will lead to fixing higher long-term rates.


"Pre-Chinese New Year demand and continued congestion keep spot rates elevated, while carriers' upper hand in the ongoing negotiations for long-term contracts mean these are seeing large jumps from levels at the start of last year," Sand said.


He added that volumes on the long-term market will grow this year as carriers want to secure revenue and many shippers want to secure capacity and avoid the pain they have felt on the spot market over the past year.


"This means that even if spot rates soften over the year, the average cost of shipping this year will be higher than ever before," the Xeneta chief analyst added.


Front and backhaul spot rates continue to diverge 


Sand noted that fronthaul long-term rates look set to "double or triple" from those set last January, while giving the example of average long-term contract rates of US$9,300 per FEU on the Far East to North Europe route, closer to triple than double their year-ago levels.


Meanwhile, long-term backhaul rates have seen more modest increases over the same period, up 12% to US$1,300 per FEU.



"Though it is still early for a definitive answer on where long-term rates in 2022 will land, it is clear that fronthaul rates will rise considerably," he added.


"We are much earlier in negotiations for long-term rates going into the US than for those from the Far East to Europe, but shippers should brace for sharp increases in the rates they are paying," he continued, noting that currently, the Xeneta platform shows that long-term contracts signed in the past three months from the Far East to the US East Coast have gone from US$3700 in January 2021 to US$7000 this year.  


"Just as with spot freight rates, long-term contracts on the transpacific have been softening in recent months, though again remain far above levels from the start of last year. There is still plenty of negotiating to be done and contracts to be signed, but there is no doubt that even if lower than the peaks of last year, long-term rates here will be much higher than in contracts signed a year ago," Sand added.

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