XSI®

Xeneta Shipping Index (XSI®) - August Overview

Long term ocean container shipping rates have continued to rise, further narrowing the spread with the spot market.

The Global XSI®, which measures all valid long term contracts in the market, increased 5% in August to stand at 159.0 points.

As was the case in July when long term rates rose by 2.5% from June, the latest increase in August is driven by the world’s largest fronthaul trades.

Long term rates on backhaul trades have continued to fall in August, though at a slower pace than they did in July.

Far East Exports sees biggest increase

The biggest XSI® sub-index – Far East Exports – is also the sub-index which has registered the biggest increase in August.

Up by 10.7% in August, it now stands at 197.9 points following two months of strong growth, making it the first XSI® sub-index to rise back above the levels seen 12 months ago.

The increase on the Far East Exports XSI® sub-index must be seen in the context of the spot market. Major fronthaul trades out of the Far East have seen the biggest spot market increases during 2024, therefore it should not be surprising to see these trades also leading the way on the long term market.

However, the phasing of these market increases is significant. When the spot market was spiking earlier in the year, the Far East Export sub-index remained relatively flat. The spot market has now begun to soften since reaching a peak in July – coinciding with the long term market starting to rise.

Narrowing spread between markets

The increasing Far East Export sub-index and softening spot rates is narrowing the spread between these markets – and where they eventually land will be crucial ahead of new contract negotiations between shippers/freight forwarders and carriers.

This is demonstrated in the fact that, while average spot rates on the fronthaul trade from the Far East to US West Coast peaked in July, they have remained relatively flat in August. Carriers are clearly doing all they can to keep the spot market elevated in the hope it pulls the long term market up higher and higher.

Market disruption has not gone away

Carriers being able to keep the spot market elevated (albeit now below its July peak) suggests the underlying forces that drove the spike in freight rates earlier this year have not gone away completely.

There is still a nervousness regarding the global geopolitical landscape, not only due to the ongoing conflict in the Red Sea, but the potential for further flashpoints, as witnessed during the recent civil unrest in Bangladesh.

For example, US importers reacted to the threat posed by the Red Sea conflict, new tariffs on goods from China and potential disruption through strikes at ports on the US East Coast and Gulf Coast by frontloading imports.

This has resulted in an earlier peak season in 2024 and there will come a time when retailers look to bring down the stocks built up in the past months, but an elevated spot market suggests that has not happened yet. The longer this situation continues the better for carriers, who will be hoping the spread between short and long term markets continues to narrow due to increasing long term rates rather than decreasing spot rates.