Friday, 05 May 2023 15:09

Price spike: Shipping lines 'inflate' spot rates in contract negotiations

Written by Evelyn Alas

The recent spike in container freight rates in the spot market could be a 'manipulation' by shipping lines to 'inflate' values ahead of the contract rate negotiation season for the 2023-2024 season, at least according to analyst firm Clarksons.

Recovery? Since mid-April container freight rates have risen sharply, giving rise to hopes that the bottom has been reached and that the rebound in rates would be a sign that the worst is over and that the industry would continue to recover for the rest of the year.

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However, according to an analysis by Clarksons, the spot rate hikes in recent weeks are due to carriers instituting general price increases and canceling a number of trips to reduce capacity.

Carriers are trying to bolster the spot market to secure higher contract rates. Their ability to maintain higher rates will be tested in the coming weeks, as current GRIs [general rate increases] may prove unsustainable, being driven primarily by contract negotiations.

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Contract season: Although recent spot rate hikes succeeded in raising fixed contract values above spot rates, new contract terms will likely drive rates down significantly from last year's levels, Clarksons estimates.

This means, according to Clarksons, that total container liner revenues will fall sharply in the latter half of the year compared to the second half of 2022.

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According to a Shipping Watch report, international bank HSBC also notes that higher spot rates will guarantee better contract rates for liners, in reference to shipping lines that have already proclaimed that contract rates will be signed at levels above spot rates even if carriers commit to lower volumes.


Translated by: A.M