Nightmare of Proportions

Container shipping companies are still sailing lucratively on previously entered into long-term contracts, but experts believe that new contracts at much lower levels beyond the year will hit the accounts hard.

Håkon Jystad says the market for shipping containers at sea was red-hot during the corona pandemic, but in the last year shipping rates have plummeted.

“First, it was on short-term contracts that the entire corona pants were shaved off, and later the rates on longer contracts started to fall“

However, in price indices for longer contracts, including those of the shipping technology company Xeneta, the overall level is still up after a break at the start of the year.

Xeneta boss Patrik Berglund, who, among other things, follows the development of freight rates in the container market.

– The only thing we see is a further reduction in long-term contracts. Those that expire in the next few months and are to be renewed, they are renewed at a much lower level.

At the same time that several new container ships are now entering the market after an order boom in 2021, Berglund says that customers they are working with are warning that much less volume will be transported in the future.

He believes that the shipping companies are now destroying themselves and that the rate picture could look better.

– Maersk is aggressive in removing capacity from the market, but the others are not as proactive. Then they undermine the market, and it is a mystery that there are so few shipping companies that do it. They should have removed capacity much sooner, they have been too slow all along.

– Smaller volumes

Berglund believes that the shipping companies’ accounts will be hit by contract developments throughout the year.

– There will always be some delays, so the first quarter will not be so critical. But you will see a clear decline from the previous quarter in the second quarter and then the full effect in the third quarter, says the Xeneta boss.

– The hope for the shipping companies is that the market will start to turn, but I have a hard time seeing that. Our customer base is clear that they should transport smaller volumes, and if you look at the macro picture, which after all drives consumption, it is still weak, he adds.