Xeneta - Experts & Thought Leaders

Industry pioneers at the Xeneta Summit 2024, in Amsterdam, the Netherlands, have been told ocean container shipping must harness the power of machine learning to protect supply chains in an increasingly complex and volatile market. In a keynote speech to announce Xeneta’s new in-platform Ocean Market Rate Outlook, Chief Product Officer - Fabio Brocca explained how machine learning will transform the way freight is bought and sold by predicting market movements on the world’s major corridors up to six months into the future. Advancement in machine learning Fabio Brocca said: "While nobody can predict COVID-19 or the Red Sea Crisis, procurement professionals are constantly making decisions based on their outlook for the next few quarters. When there is so much volatility and uncertainty across global supply chains, providing market guidance feels like an impossible task." He adds, "The industry has come a long way using technology and data to improve every procurement process, but thanks to advancement in machine learning and AI we can now go even further by providing explainable predictions on how the market is likely to develop in the future." Market Rate Outlook product The new Market Rate Outlook product is unique to the ocean container shipping industry Xeneta is the pioneering ocean and air freight data and intelligence platform. The new Market Rate Outlook product is unique to the ocean container shipping industry. The machine-learning model leverages the 500+ million ocean freight rate datapoints in the Xeneta platform, combined with 20+ parameters, such as fleet and capacity data, import and export volumes, and macroeconomic factors such as GDP, inflation, PMI and fuel prices. Xeneta’s market analyst The outlook also includes commentaries by Xeneta’s market analyst team, highlighting assumptions and key factors affecting the freight rate trends. Finally, Xeneta’s customers can provide real world feedback which is anonymised, aggregated, and used to deepen the market outlook further. Fabio Brocca said: "The Market Rate Outlook is not a crystal ball and it cannot predict major events, such as the Red Sea crisis or COVID-19." Market Rate Outlook Fabio Brocca added: "The potential for unknown disruptions to impact the market does not negate the value of the outlook. This is about empowering procurement professionals to make informed decisions based on how the market is likely to develop." He continues, "Market Rate Outlook explains the assumptions behind its predictions so businesses can make strategic decisions with confidence. We are only at the beginning of the journey, but I have no doubt that a more scientific approach to decision-making will become fundamental to the way freight is procured across the market." Global supply chains The conflict has seen spot markets spiral across the world’s major trades in 2024 The Xeneta Summit brings together stakeholders from across the ocean and air freight industries to discuss the challenges facing global supply chains, which this year focuses heavily on the ongoing impact of conflict in the Red Sea. The conflict has seen spot markets spiral across the world’s major trades in 2024, including by more than 450% from the Far East to North Europe and almost 400% into the US West Coast. Xeneta market data Fabio Brocca believes index-linked contracts, which see the freight rate paid by shippers tracked against market movements, will become increasingly important in the wake of growing market uncertainty. He said: "Businesses are facing up to the reality of market volatility and are using data to regain some control. Shippers and service providers are turning to index-linked contracts based on Xeneta market data to give assurance the freight rates being paid remain fair and competitive, while also ensuring containers are shipped during times of severe disruption." Global supply chains In addition to announcing the Market Rate Outlook, Xeneta has launched a series of further in-platform products at the Summit, including enhanced industry-specific freight rate benchmarking and transit time comparison across trade corridors and carriers. Fabio Brocca concludes: "Whether it is predicting rate trends, index-linked contracts or being able to benchmark freight rates across peers and carriers, it is now incredibly difficult to navigate global supply chains without having access to the most comprehensive and reliable market data."

The ocean container shipping market reached a tipping point in July, with long-term rates on major fronthaul trades showing signs of life just as spiraling short-term rates begin to soften. The Xeneta Global XSI®, which covers all valid long-term contracts in the market, edged up 2.5% in July to stand at 151.5 points. XSI® sub-index More notably, the underlying XSI® sub-index for Far East Exports which includes the world’s biggest fronthaul trades to Europe and the US increased 12.6% in July to 178.8 points. This coincides with short-term rates on major trades from the Far East to the US and Europe beginning to soften in July from the massive increases seen over recent months. Ocean container shipping rates Emily Stausbøll, Xeneta Senior Shipping Analyst, said, “Long-term ocean container shipping rates remained subdued despite massive increases on the short-term market in May and June – but that is starting to change." “For example, while short-term rates on the Far East to US West Coast trade increased more than 140% between 30 April and 1 July, the long-term market increased by 20%. However, short-term rates to the US West Coast have fallen by 12% since 1 July, just as the long-term market shows signs of life.” A balance between shippers and carriers Increasing long-term rates and decreasing short-term rates means the spread is narrowing between the markets Increasing long-term rates and decreasing short-term rates means the spread is narrowing between the markets, which presents a delicate balance ahead of long-term contract negotiations between shippers and carriers later this year. Stausbøll said, “This is a pivotal time for the market. The big question is, how high will long-term rates climb before growth is stunted by the falling spot market?" New contract negotiations “Shippers will be hoping the spot market crashes back down hard and fast, while carriers will be doing everything possible to keep short-term rates elevated for as long as possible." “Where the long and short-term markets land at the point new contract negotiations begin will be crucial in determining whether shippers or carriers have the strongest hand." Changing market sentiments “A few weeks ago, when spot rates were still spiraling, carriers would have been feeling confident about long-term contract negotiations - but market sentiment can change very quickly." “Shippers won’t want to see the long-term market starting to increase because it has already been a bruising 2024 in the spot market. But they should have cautious optimism because, at the moment, it feels like there is more room for spot rates to fall than there is for long-term rates to rise.” Potential disruptions Stausbøll reiterated that ocean supply chains remain under pressure and there are potential disruptions Stausbøll reiterated that ocean supply chains remain under pressure and there are potential disruptions on the horizon. She said, “Diversions are still in place in the Red Sea, meaning the majority of container ships are continuing to sail around the Cape of Good Hope." Tariffs on Chinese imports “There is the threat of union action at ports on the US East and Gulf Coasts, while a Trump presidency could see businesses rush to ship goods ahead of new tariffs on Chinese imports." “There is also the risk of new geopolitical incidents, as we are seeing in Bangladesh where civil unrest is impacting port operations. It will not take much to push ocean supply chains back into the red and send spot rates heading upward once again, which would also have consequences for the long-term market.”

The dramatic spike in the ocean freight container shipping market is reaching its peak as importers push back against spiralling spot rates. Data released by Xeneta shows average spot rates from the Far East to the US East Coast increased by 3.7% on 15 July to stand at USD 10 045 per FEU (40ft equivalent shipping container). Average spot rates On the US West Coast, spot rates increased by 2.0% to stand at USD 8,045 per FEU. While this means spot rates are up almost 150% on these trades since the end of April, the latest increases of 3.7% and 2.0% are far smaller compared to 1 July when rates rose by 22% into the US East Coast and 12% into the US West Coast. Available capacity Emily Stausbøll, Xeneta Senior Shipping Analyst, said, “Xeneta data shows some ocean container carriers are still pushing spot rate increases in mid-July, but, for the first time in a long time, some carriers are offering lower spot rates." “Crucially, this suggests a growing level of available capacity in the market and shippers can once again start to play carriers off against each other - instead of feeling they need to pay whatever price they are offered to secure space. As the balance of negotiating power starts to swing back towards shippers, we should see spot rates start to come back down.” Mid-high (and high) spot rates Mid-high data identifies the spot rates being paid by shippers in the 75th percentile of the market The clearest indication of a peak being reached is found in the Xeneta market ‘mid-high’ data, which identifies the spot rates being paid by shippers in the 75th percentile of the market. On the trades from the Far East into the US, the market mid-high (and high) spot rates have remained almost flat during July, indicating the high end of the market is no longer spiralling. Lowering prices for spots Stausbøll said, “A flat market mid-high means a growing number of shippers and freight forwarders no longer feel they need to pay spot rates at the upper end of the market to ensure their containers are transported." “This is the first crack in the dam because it means carriers are no longer dictating which containers to load – but rather having to lower rates to secure volumes. If these carriers want to compete and retain market share, then they need to lower their prices.” Peak market prices The market is reaching a peak on front haul trades from the Far East to North Europe and the Mediterranean The market is also reaching a peak on front haul trades from the Far East to North Europe and the Mediterranean where average spot rates increased by 4.7% and 3.5% on 15 July to stand at USD 8 480 per FEU and USD 8 150 per FEU respectively. This is less than the increases of 17% and 10% on 1 July. Stausbøll said, “It has been a painful time for shippers who have been forced to pay spiralling spot rates and faced the prospect of being unable to ship their cargo on existing long-term contracts. Signs of the spot market reaching a peak will be welcomed by shippers, but it does not mean an end to their troubles." Port congestion “Port congestion is easing, more ocean container shipping capacity is becoming available, and it looks likely the frontloading of imports seen earlier this year will mean a slacker traditional Q3 peak season than there would have otherwise been." “However, spot rates remain up by just under 400% from the Far East into the US West Coast since mid-December 2023, by more than 300% into the US East Coast and 455% into North Europe. Perhaps the market has reached a peak, but shippers are still paying hugely elevated costs." Cause of the market spike “The fundamental cause of the market spike in 2024 is the conflict in the Red Sea, with the majority of container ships continuing to sail around the Cape of Good Hope. Unless there is a large-scale return of container ships to the Suez Canal – which seems unlikely at present - then the situation cannot be fully resolved." “However, as we saw during March and April, the spot market can soften while the Red Sea diversions are in place, and this is what shippers will be hoping for in the remainder of 2024.”