Industry analysts are looking for signs of container market normalization to confirm that freight rates have peaked and validate the industry's earlier forecast that the market will return to normal in the second half of 2022.

Market intelligence and benchmarking platform Xeneta's latest market analysis report released on July 28 said that although the world's major trade routes long-term contract sea freight rates have risen sharply again, the month-on-month growth is slowing down, while spot freight rates continue to weaken, indicating that freight rates may have peaked.

Xeneta CEO Patrik Berglund commented: "In the past 19 months, carriers have benefited from strong demand, container shortages, port congestion and COVID-19 uncertainty, enjoying amazing freight rate increases. July saw more across-the-board increases, but the signs point to a 'turn' as some fundamentals evolve."

Patrik Berglund noted that growth in July was the slowest since January and that upward pressure on long-term agreements is easing as spot prices across major trades fall. In addition, freight volumes on many routes are declining, for example, in the first five months of 2022, European container imports fell by 3% and exports by 6%.

"There are indications that freight rates have reached a peak and that the price of the new agreement is more likely to stay the same rather than suddenly jump as we have been used to recently. However, this may not be good comfort for shippers, as freight rates are still stable at historically high levels." The Xeneta Shipping Index shows that from July 2019, before the outbreak began, freight rates have risen 112 percent over the past year and 280 percent over the past three years.

Xeneta's data is consistent with forecasts made by many carriers earlier in 2022. Both Maersk and Hapg-Lloyd said in their outlooks that the market is likely to stabilize in the middle of the year, although earlier Hapg-Lloyd again raised its forecast for the second half of the year and the entire 2022, citing the freight advantage in the first half of 2022.

like the carrier, Xeneta highlighted several factors that create uncertainty in the market. In addition to the drop in traffic volumes, there is continued congestion at U.S. and European ports, as well as union strikes that could affect the supply chain. The British dockworkers' union has threatened strikes in Felikstow and Liverpool, while Hamburg is one of the German ports recently hit by a strike.

Xeneta believes that given the recent decline in the spot market, shippers may also take advantage of the market's weakness and renegotiate contract freight rates. "Our customers, primarily high-volume shippers, now find themselves in a more favorable negotiating position." Patrik Berglund said.

Source: Maritime Service Network