With spot rates fluctuating as a reflection of supply chain disruptions and dipping demand, shippers and carriers have been struggling to ensure that they don’t overpay for freight. Starting from the COVID-19 aftershocks, the supply chain has been volatile since 2020. Now in 2023, as the time for renewal of contracts comes up, shipping lines are desperate to “rekindle relationships,” get contracts signed and, MQC (minimum quantity commitments) agreed, to avoid being overly exposed to the spot market. 

Xeneta’s XSI Asia to US west coast component slipped another percentage point this week, to $1,581 per 40ft, but lower FAK rates are widely available. For the US east coast, spot rates from Asia are tumbling fast – down to about $2,000 per 40ft – bringing into question the economics of the longer-transit, considerably more expensive, all-water trade lane for carriers serving the route.

Drewry’s WCI Asia to North Europe reading this week fell another 2%, to $1,593 per 40ft, albeit that FAK ‘market rates’ from all the main carriers are about $1,000 per 40ft. Mediterranean rates also continued to slide, with the WCI component declining 2%, to $2,477 per 40ft. Rate procurement managers and shipping executives fear signing a deal at high rates in case there is a crash in prices again. 

As a result, contracts for shorter periods seem to be more in vogue. Several shippers have expressed concerns about the fragility of the Asia-Europe trade lanes. Many annual contract negotiations that normally happen in November and December have been put on the back burner while volatility in the market continues. Xeneta’s chief analyst, Peter Sand, believes that transatlantic rates will normalize within the next six months, though. Shippers are clearly not just looking for low freight rates, but are more interested in stability despite disruptions.