May saw the highest ever monthly increase in long-term contracted ocean freight rates, as the cost of locking in container shipments soared by 30.1%, according to the latest update from Xeneta.
The ocean and air freight rate benchmarking and market intelligence platform said the "unprecedented hike," was seen in the latest Xeneta Shipping Index (XSI®) Public Indices for the contract market, which means that long-term rates are now 150.6% up year-on-year.
Xeneta said in 2022 alone, costs have climbed by 55%.
"This is a staggering development," said Patrik Berglund, Xeneta CEO.
"Just last month we were looking at an 11% rise and questioning how such continued gains were possible. Now we see a monthly increase of almost a third blowing the previous records out of the water," he added.
"The breath-taking gains reflect the sharp increase of the average of all valid long-term contracts, as older contracts, with lower rates, expire and are replaced by newer agreements with much higher rates."
Universal gains
The Oslo-based Xeneta noted that its XSI® is compiled from real-time data crowdsourced from leading shippers, delivering in-depth insights into key global trades.
"In May, the most dramatic development was seen in US import costs, which jumped by 65.1% to stand 205.4% up year-on-year, as new long-term contracts (which usually run from the start of May to April) came into force," the report said, noting that the XSI® US export benchmark showed a less pronounced, but still strong, upwards move of 9.9%.
European long-term rates, meanwhile, rose by 11.3% on the import index (122% up year-on-year), while exports recorded their largest ever monthly jump of 27.6%, an impressive 138.3% increase in May 2021.
Far East import and export indices both raced upwards, according to Xeneta, with the former rising by 17.4% and the latter soaring 35.4%, the largest ever monthly rise for this measure.
Seen from a year-on-year perspective, the respective benchmarks stand 57.1% and 174.8% up.
"It goes without saying that the main carriers are achieving astronomical results at the moment," Berglund said. "Last month we saw deeply impressive figures from OOCL and Maersk and now we have Zim posting a 113% year-on-year revenue jump, with an EBITDA of US$2.5 billion. As a result, the management team has upgraded its full-year EBITDA to US$7.8-8.2 billion.
"Shippers, on the other hand, are being bled dry, while the lockdowns in China, allied to blanked sailings from the carriers to protect softening spot rates, have, and may continue to, impact upon the supply chain."
The Xeneta chief further noted that not as much cargo as anticipated has been moved over the last couple of months.
"With the peak season approaching, that could cause added disruption. That leaves shippers in a position where they're paying through the nose for services that, to be diplomatic, may not always meet expectations," Berglund added.
Certain uncertainty
With the difficultly of predicting developments on even a month-to-month basis, Berglund noted that the mid- to long-term forecasts are "nigh on impossible."
"Continuing regulatory investigations into carrier practices could impact on business fortunes (although no evidence of collusion or unfair practices has been uncovered so far), while China's zero COVID policy may continue to hit industrial and manufacturing output," he said.
"Exactly how these things progress, not to mention the ongoing ramifications of geopolitical upheaval, casts a shadow of uncertainty over those looking to tailor the best logistics solutions for long-term needs."
