Xeneta Shipping Index (XSI) Records Sharp 62.3% Decline in October

The Xeneta Shipping Index (XSI) experienced a significant drop of 4.7% in October, plummeting to 158.5 points, marking a substantial 62.3% decrease compared to the same period last year. The XSI monitors real-time developments in global long-term contracted rates and has recently found support from older contracts dating back to 2022.

During the TOC Asia conference, Ashna Mishra, Global Lead of Shipping Strategic Engagement and Intelligence at S&P Global Commodity Insights, revealed that discussions with shippers for 2023 indicated a reluctance towards signing long-term contracts. Shippers expressed a preference for shorter contracts, such as six-month or three-month durations.

Looking ahead to 2024 contract negotiations, Mishra highlighted shippers’ inclination to sway negotiations in their favor, given the stagnant freight rates and the limited impact of carriers’ capacity management strategies on the freight market.

Xeneta warns that 2024 could pose even greater challenges for ocean carriers. Emily Stausbøll, Xeneta Market Analyst, noted that while older contracts provided financial insulation in 2023, major carriers still reported significant losses in Q3. The imminent replacement of these older contracts in the coming year could expose carriers to the current weak market, potentially resulting in substantial financial setbacks.

Despite long-term contract rates remaining 39.5% above November 2020 levels, some major liner companies continue to report losses. Stausbøll emphasized that avoiding catastrophic financial losses in 2024 would hinge on effective capacity management, a formidable challenge.

Addressing the issue of overcapacity, Alan Murphy, Sea Intelligence CEO and Founder, expressed his most optimistic forecast, anticipating “massive oversupply” in the sector persisting until at least 2028. Murphy cautioned that the next decade might mirror the pre-pandemic years, dominated by discussions exclusively about oversupply.