Long-term interest rates on large transactions are falling, but not at the same pace as spot rates, according to Xeneta's latest update.

“Shippers are forced to sign long-term contracts and pay substantially more than spot market rates for some transactions. On average, the spot price for the six most important Far East transactions has fallen by 75 percent since the beginning of the year.” all transactions show a decrease. On average, long-term interest rates have fallen by only 13 percent for these six most important transactions from the Far East."

The average long-term rate for contracts that went live in the past three months is at least $1,900 per FEU higher than the average spot rate in early December. "By contrast, at the beginning of the year, all long-term average prices on these trades were below the prevailing spot rate, with long-term interest rates offering a discount of at least $2,000 per FEU on these six trades."

The biggest difference between long and short interest rates can be found from the Far East to the east coast of the US, the update said. “At the beginning of the year, long-term rates averaged $4,900 per FEU lower than what was available in the spot market. Now long-term rates are $5,030 per FEU higher (+237 percent) than spot rates.”

Since the start of the year, long-term fares on shipping routes to both coasts have increased by about 11 percent. “However, long-term interest rates to the US rose more slowly than other transactions and only peaked in the second quarter due to the late start of the tender process on these transactions than elsewhere.”

The biggest change in the difference between short and long term rates is from the Far East to Northern Europe where long term rates have increased from $5,640 per FEU more expensive to now $4,460 per FEU cheaper. Both long and short rates have fallen since the start of the year, but with spot rates down 83 percent and long-term rates down just 24 percent, the latter have become the more expensive choice, the update said.

Christian Roeloffs, co-founder and CEO of Container xChange says, “In 2023 there is a high probability of an all-out price war. just have enough capacity, both on the ship and container side.With the competitive dynamics in the container and liner shipping industry, I don't expect the major players in particular to be hesitant, and we expect prices to fall to near-variable costs.We also foresee market consolidation.

“In the year 2023, freight forwarders will be able to shop quite a bit, and there will be a lot of room for negotiation, especially in the early parts of the year. Contract rates will follow as spot rates drop significantly.”