Xeneta - Experts & Thought Leaders

The prospect of a large-scale return of container ships to the Red Sea following the announcement of a ceasefire between the US and Houthi militia in Yemen would flood the market with shipping capacity and cause a global collapse in freight rates – but the situation remains far from certain. Data released by Xeneta – the ocean and air freight intelligence platform – shows global TEU-mile demand would decrease 6% if container ships begin sailing through the Red Sea and Suez Canal again instead of diverting around the Cape of Good Hope. TEU-mile demand factors TEU-mile demand factors the distance each 20ft equivalent container is transported globally TEU-mile demand factors the distance each 20ft equivalent container (TEU) is transported globally as well as the number transported. The 6% is based on global container shipping demand growth of 1% for the full year 2025 and a large-scale return of container ships to the Red Sea in H2. Peter Sand, Xeneta Chief Analyst, said: “Of all the geo-political disruptions impacting ocean container shipping in 2025, conflict in the Red Sea continues to cast the longest shadow, so any meaningful return to the region would have massive consequences." “Container ships returning to the Red Sea would flood the market with capacity with the inevitable outcome of collapsing freight rates. If we also see a continued slowdown in imports into the US due to tariffs, then the collapse will be even harder and even more dramatic.” Impact on freight rates Average spot rates from the Far East to North Europe and Mediterranean are USD 2100 per FEU (40ft container) and USD 3125 per FEU, respectively. This is an increase of 39% and 68% compared to pre-Red Sea Crisis levels on 1 December 2023. From the Far East to the US East Coast and the US West Coast, spot rates stand at USD 3715 per FEU and USD 2620 per FEU, respectively. This is an increase of 49% and 59% compared to the pre-Red Sea Crisis. Deliveries of new vessels Average spot rates from the Far East to North Europe and Mediterranean are USD 2100 per FEU Sand said: “Carriers have capacity management strategies to keep rates elevated, such as blanking sailings when demand falls." "But the amount of capacity that will flood the market following a return to the Red Sea, combined with a downturn in global container demand due to tariffs and high deliveries of new vessels, would require capacity management at an altogether different order of magnitude – or another major black swan event – to stop freight rates falling to a level that puts carriers in a loss-making position.” A sense of reality is required While Sand believes spot rates could collapse back to pre-Red Sea Crisis levels, he has warned the situation remains volatile and requires a sense of reality on the complexity involved in container ships returning to the Suez Canal. Sand believes spot rates could collapse back to pre-Red Sea Crisis levels Sand said: “The announced ceasefire plan between Israel and Hamas in February raised restrained hopes of a return of container shipping to the Red Sea but data shows no increase in transits through Bab el-Mandeb Strait or the Suez Canal during 2025." “Carriers need assurances over long-term safety of their crew and ships, let alone customers’ cargo. Perhaps even more importantly, so do insurance companies." Disruption to global maritime supply chains Sand added: “We also know Houthi militia will continue to attack some ships because they stated very clearly the ceasefire agreement is with the US and does not include Israel." “Introducing diversions around the Cape of Good Hope in early 2024 caused massive disruption to global maritime supply chains. Carriers and shippers do not want to go through the disruption of restoring schedules to the Suez Canal only for the situation to deteriorate - sending them back to square one and having to re-introduce diversions around the Cape of Good Hope.”

Xeneta has launched an index-linked contract (ILC) simulator to help shippers navigate ocean freight container market volatility and end procurement inefficiency. The new ILC Simulator – now available in the Xeneta platform – allows shippers to compare traditional fixed-rate contracts with index-linked contracts using sample corridor data or their own historical ocean container freight rates. Shippers and logistics services The simulator is an important first step towards index-linked contracting, which is rising in prominence as shippers and logistics service providers try to prevent long-term agreements being torn up, or regularly renegotiated, in the wake of disruptions such as Covid-19, the Red Sea Crisis and US-China trade war. Fabio Brocca, Xeneta Chief Product Officer, said: “Xeneta’s index-linked contract simulator is a major advancement for the container shipping industry. It offers the important first step towards realising a more efficient, data-driven freight procurement strategy that is built to withstand the realities of today’s geo-political and economic trade landscape." Benefits of index-linked contracts Xeneta is uniquely positioned to provide the depth, freshness and reliability of data Brocca added: “Market volatility is causing contracts and supplier relationships to break down, bringing the inefficiencies of traditional RFQ tender processes into sharper focus." "Shippers came to Xeneta asking for help and I am proud to be leading the charge towards a better way to buy and sell freight by launching this simulator and opening eyes to the benefits of index-linked contracts.” Xeneta freight rates Xeneta already provides data for hundreds of index-linked contracts, which ensure freight rates remain aligned to market movement. This allows shippers and providers to concentrate on service delivery and supply chain resilience as part of a long-term partnership. As the pioneering neutral provider of ocean and air freight intelligence, Xeneta is uniquely positioned to provide the depth, freshness and reliability of data required to base a successful ILC against. Xeneta platform Xeneta platform calls upon more than 600 million contracted freight rates sourced from shippers The Xeneta platform calls upon more than 600 million contracted freight rates sourced from shippers and freight forwarders across both long and short-term markets. Brocca has advised ILCs risk failure if they are not based on the appropriate data for a shipper’s individual requirements. He said: “We have seen costly mistakes when shippers do not base their ILC on the right data, such as using a 20ft container index for pricing a 40ft container or not leveraging data across long and short term markets." new Xeneta ILC simulator Brocca added: “With the new Xeneta ILC simulator, customers can get started in a matter of minutes in understanding the intricacies of this new way of procuring freight so they can avoid costly errors and move forward to implementation with confidence." “We understand this is a significant shift in the way many businesses procure freight, so it is important we provide guidance and best practices in creating ILCs, which will then also help with industry standardisation.”

Middle East ceasefire and Lunar New Year will see ocean container freight rates fall further in February - with carriers now taking action to slow the market decline. Latest data from Xeneta – the ocean and air freight intelligence platform – shows average spot rates from the Far East stand at USD 3 795 per FEU (40ft container) into North Europe and USD 5 085 per FEU into the Mediterranean – down 22% and 13% respectively since 1 January. Falling spot rates  Early data suggests spot rates will fall further on 1 February, down 5-10% on both trades. From the Far East to the US East Coast, average spot rates decreased by 7% during January to stand at USD 6,417 per FEU. On the US West Coast, spot rates are USD 5 021 per FEU, down 14% in the same period. Spot rates on both US-bound trades flattened in the second half of January following a sharp early-month decline. Heading into February, spot rates could fall further, particularly into the US West Coast, while the US East Coast holds a little firmer. Exports slowdown Peter Sand, Xeneta Chief Analyst, said, “Ceasefire in the Middle East does not suddenly mean there is now safe passage through the Red Sea for all container ships – but it is enough to cause a change in market sentiment and this has a real impact on freight rates." “We must factor Lunar New Year celebrations in the Far East, which traditionally sees a slowdown in containerised exports at this time of year, but there is little doubt the evolving situation in the Red Sea is contributing to falling freight rates.” Capacity management Ocean container carriers are taking action to slow the market decline through capacity management Ocean container carriers are taking action to slow the market decline through capacity management. On the trade from the Far East to the Mediterranean, blanked sailings will steadily increase to reach 38 900 TEU (20ft equivalent container) of shipping capacity in the week commencing 24 February. This is an increase of 318% from current levels. From the Far East to North Europe, blanked sailings will reach 75,700 TEU of shipping capacity by 24 February – an increase of 449%. Impact with ceasefire Sand said, “Carriers will not sit on their hands while freight rates collapse. They will do everything they can to keep rates elevated and have got much smarter at capacity management in recent years.” Phase 1 of the ceasefire between Israel and Hamas commenced on 19 January and is expected to last 42 days before entering Phase 2, which could see a permanent ceasefire agreed. Importance of freight rates in February Sand said, “February may be crucial in understanding how ocean container freight rates will develop in 2025. The ceasefire in the Middle East is set to enter Phase 2 and we will see exports increase from the Far East in the first half of the month following the Lunar New Year." “Despite the decline in January, we must remember that average spot rates are still massively elevated on the Far East front hauls to Europe and the US compared to pre-Red Sea crisis, so they potentially have a long way to go." Change in ocean container shipping “Carriers are going to find it extremely difficult to keep rates elevated, especially given the record number of ships entering service, so we could see markets collapse if there is a large return to the Red Sea." “The situation is far from certain and we know how suddenly and dramatically the outlook can change in ocean container shipping. There is still a long way to go before a lasting peace deal is agreed in the Middle East and other geopolitical factors, such as Trump’s tariff proposals, could come into play and put upward pressure on freight rates.”