Recent negotiations for container shipping contracts reveal carriers are walking a fine line between risk and reward, with the market enveloped in a veil of uncertainty around the Red Sea. Xeneta's findings for April 2024, presented on May 2, 2024, show the global Xsi index—which measures the average value of all valid long-term contracts—has held steady at 154.3 points, marking a modest increase of 1.7% from March.
However, a closer look at the sub-indices of this global data reveals a dynamic market: the Xsi index for European imports reached 171.8 points, up 9.2% from March, marking the most significant rise since June 2022. Conversely, the index for US imports dropped 9.4% in April, settling at 150.6 points.
Senior analyst Emily Stausbøll from Xeneta explains, "We observed a significant rise in the Xsi index for European imports in April, primarily due to the ongoing impact of the conflict in the Red Sea. However, given that the spot market for routes like the Far East to the Mediterranean is still up by 60% compared to twelve months ago, carriers would be expected to push for even higher long-term rates."
The need for higher long-term rates is underscored by a 10.7% increase in global container volumes in January and February compared to the same period in 2023. Moreover, even the sub-index for European imports, which recorded strong monthly growth in April, is down by 34.2% compared to the previous year. "Carriers indeed desire higher long-term rates, but they also need to secure long-term volumes. This is the fine line they are trying to walk, balancing risk and reward in such an unpredictable market," clarifies Stausbøll.
The Xeneta executive further adds that "there have been record deliveries of new container ships each quarter since the second quarter of 2023, but the conflict in the Red Sea has largely shielded carriers from excess capacity in 2024. Should the situation change and we see a massive return of container ships to the Red Sea over the next twelve months, carriers will be severely exposed to the impact of excess capacity, and spot market rates could plummet."
