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Xeneta Analyst: The volatility in the spot rate has now spread to the long-term rate
The latest Drury World Container Index (WCI) container shipping rates remained stubbornly high this week, though down 1% to an average of $5,736 per 40 feet, still well above this year's average of $3,946.

But in that small change, rates between Shanghai and Los Angeles fell 3% to $6,740 per 40 feet.

But the report concludes: "Drury believes spot rates have peaked, but continued disruptions will keep spot rates low for some time."

Just a few weeks ago, the UN ceasefire resolution sent liner shares down on expectations that the outbreak of peace would allow freight rates to quickly return to normal.

In early July, the World Bank released a study aimed at quantification and forecasting the impact of transport disruptions on freight rates, finding that the Shanghai Container Rate Index (SCFI) for stranded or intercepted ships increases by $2,300 per TEU for every million TEU of container trade that occurs.

According to the World Bank, "Regardless of the cause, delays or diversions mean supply chain disruptions worldwide." The Global supply Chain Stress Index explains the spike in freight rates during supply chain disruptions, assuming shippers are willing to pay for scarce space."

Chaos in the Red Sea is likely to keep Asia-Europe freight rates high for months to come, and any escalation of conflict in the Middle East will have an impact on the shipping industry, now an accepted strategic target.

Maersk recently announced preliminary revenue of $12.8 billion for the second quarter of 24, and said it expects the chaos "to continue at least until the end of 2024, while the container market demand will also be strong."

The liner giant raised its full-year guidance for the second time, telling investors to expect earnings before interest, tax, depreciation and amortization (EBITDA) to reach $9 billion to $11 billion from the previous increase of $7 billion to $9 billion, and the overall container market volume will grow 4-6 times (previously 2.5-4.5 times).

At the same time, Xeneta reported that the volatility in spot rates has now spread to long-term rates.

The Global Xeneta Shipping Index (XSI) rose 2.5% month-on-month in July from June. Meanwhile, the XSI sub-index for Far East exports to Europe and the US, which has been hovering around 150 since the beginning of the year, suddenly rose 12.6 per cent to 178.8 in July.

Xeneta analyst Emily Stausøll sees this as proof that the peak in spot prices is having an impact. Despite the sharp increase in short-term market rates in May and June, long-term sea container rates remained subdued, but this is starting to change.

At the height of the disruption in 2022, XSI for Far East exports stood at 640 points, but Xeneta noted that the situation was different as shortages of equipment led to a corresponding increase in long-term rates for backhaul trade as shipping lines struggled to send containers back to Asia.
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