After the record-breaking fall of January, global long-term ocean freight rates held up surprisingly well in February, boosted by "a special month" for US exports, according to the latest data from the Xeneta Shipping Index (XSI®).

6th month of consecutive decline

Xeneta said average long-term contracted rates dropped by just 1% across the month, following on from a 13.3% month-on-month collapse in January.

Despite the relatively strong performance, seen against a backdrop of weak fundamentals, Xeneta noted, however, that this is now the sixth consecutive month of falls, with the index losing 22% of its value since August 2022.

"Given the lack of demand, challenging macro-economic conditions, deflated spot rates, and rampant industry overcapacity, observers may have expected a continuation of the steep downward trend for long-term contracts," said Patrik Berglund, chief executive of Xeneta.

"However, a powerhouse performance for the US export benchmark, with a 16.5% appreciation, arrested the decline, pushing that particular corridor to an all-time high," he added.

That said, he noted that one stand-out performer should not cloud the big market picture.

"If we look across the rest of the trade lanes, the development remains clear for all to see. The drops may not be as dramatic as we saw last month, but there are still some sizable declines on the world's leading corridors," the Xeneta chief added, noting that it remains a very challenging situation for carriers fighting to secure cargoes and that should continue to impact upon rates going forwards.

The XSI®'s regional data gives credence to Berglund's analysis.

Rate drops but still above pre-pandemic levels

Xeneta noted that aside from the US export rates growth, the majority of arrows point resolutely downwards. The US import sub-index fell by 3.9% but is still 79.86% up against this time last year.

Two of the routes that make up this XSI® defied the overall trend, with the South American East Coast - US East Coast and the Southern part of Africa - US East Coast showing their first growth since November 2022 (by 13% and 8%, respectively).

The Far East saw both benchmarks drop, with import rates declining 4.4% (up 13% year-on-year) and the all-important export XSI® dropping by 4.6%.

Although this latter figure has fallen consistently over recent months, Xeneta said it remains a "mighty" 244.5% up compared to the per-pandemic days of January 2020.

The ocean and air freight rate benchmarking and market intelligence platform noted that in Europe, there was a break in the economic clouds for the import XSI®, which moved up 3.5% on the back of strong import rates into the Mediterranean Sea from the US East and West Coasts (with the average of all valid long term rates rising by 86% and 49% respectively).

The benchmark is now 31.6% up year-on-year, it added.

Xeneta further noted that exports moved in the opposite direction, with this XSI® dropping by 2.6% (up 65.3% from February 2022).

It added that its data also showed "steady declines" across the board, with exports out of the Mediterranean Sea to Korea and Japan falling the most.

Although there's little for the carriers to cheer in the latest figures, Berglund notes that a sense of perspective is important when assessing current market falls.

Long-term strength noted

"Six months of declining rates is, naturally, of great concern to the carrier community, as is the fact that fundamentals remain challenging for the immediate future," the Xeneta chief executive said.

"But it's not as if the shippers are suddenly seeing 'bargain' prices for their cargoes. Yes, they have the upper hand in negotiations, especially with the fact that spot rates are so depressed, but relatively speaking, long-term contracts remain historically high," he added.

Berglund noted that even with the current downward trajectory, the global XSI® remains 43.0% up year-on-year.

"When we go back to January 2020, rates have climbed by 207.7%. So, even if the future is uncertain for carriers, at least the rates are falling from a position of real strength. Time, and the data, will tell how long they can stay that way," he added.