The long-term association negotiations have reached an impasse! 2M continues to suspend flights! Contract freight rates will drop sharply in the future

While container spot prices on the Asia-Europe and trans-Pacific trade lanes appear to have bottomed out, start dates for many new long-term contracts remain uncertain. Shippers, BCOs and NVOCCs are shifting a higher percentage of their business to the spot market due to deadlocked contract negotiations and weak demand.

In fact, shipping companies are actively encouraging their contract customers to book space through spot prices, rather than handing over cargo to competitors and then going back to win customers.

The latest Baltic Freight Index (FBX), Asia to North Europe was flat at an average of $1,349 per 40 feet. Obviously, the shipping company is ready to take all measures in terms of capacity management to prevent the freight rate of this route from falling below $1,000. The FBX index from Asia to West America also held steady at $1,006/FEU, while East America held steady at $2,100 /FEU after recording losses in previous weeks .

Trans-Pacific shipping companies are stepping up the implementation of the “blank voyage” plan to alleviate the impact of reduced demand and the pressure of further declines in freight rates. Recently, Maersk and MSC, partners of the 2M alliance, announced on the 31st that they would cancel their plans on April 13th . And the two voyages TP6/Pearl and TP2/Jaguar departing from China on the 21st.

In fact, the volume of cargo on the route is sluggish, and the future prospects are uncertain. The strategy of canceling voyages adopted by shipping companies to alleviate the impact of extremely weak demand and curb the decline in spot freight rates for containers has obviously not achieved results. On February 13, Maersk announced that it will suspend the trans-Pacific TP20 pendulum route until further notice due to the forecast of reduced global demand and the decision to take measures to balance the service network. In mid-March, the 2M alliance announced that it would permanently stop operating the AE1/Shogun loop, one of its six Asia-Europe routes.

Meanwhile, Xeneta’s long-term freight rate analysis for March showed the freight benchmark firm’s index fell just 0.5% in its crowdsourced data, after falling by a quarter since last August.

Xeneta CEO Patrik Berglund explained that this does not mean that the liner market has rebounded, but is due to the lack of new contract data from shipper customers. He explained: “The main reason for the relatively small decline is a lack of new active contracts rather than a strengthening of the fundamentals. The main bidding season in Europe is over, and the bidding season in the US market is coming. To say the least, The prospects for shipping companies to maintain current long-term contract rates look slim. ”

Berglund said new contract rates are expected to drop “significantly” in the coming months , which in turn will pull down the XSI significantly. He added: “Barring a major event, I think the long-term contracts in the second half of the year will be very different from the contracts in force in early 2023.”

In other routes, container spot freight rates on the transatlantic route continued to decline week-on-week, with Xeneta’s XSI Nordic to US East Index showing freight rates falling again by 8% to $3,975 /FEU in the past seven days .

In addition, according to a trade manager of a North Atlantic shipping company, the market price has actually fallen below $3,000. “Freight rates are expected to fall back to $2,000 per case by June,” the manager said.