Xeneta customers abandon long-term contracts

As 2022 draws to a close, with much of the same volatility as the previous two years, the ocean freight market is finally showing signs of stabilizing.

At the start of the year with record-high freight rates, Xeneta's data is showing a trend towards a stable market with an advantage for buyers. Compared to past highs and previous sellers' advantage – the data is showing a glimmer of hope at the end of the tunnel for buyers (on some shipping routes).

The customer-exclusive December Freight Market Pulse Webinar, hosted by Xeneta CEO and Co-Founder, Patrik Berglund and Michael Braun, VP of Customer Solutions, presented a review of the year 2022 and customer sentiment ahead of the upcoming bidding season.

By consensus, 0% of Xeneta customers said they would continue with their existing long-term contracts, saying this is a favorable time for buyers in the freight market. The trades show a clear recent downtrend and indicate the routes to be watched are Asia–US, Asia–Europe, Europe–US.

Key highlights that Xeneta Customers say:

• 0% customers continue with existing long-term contract
• 55% of customers are pushing through requests for quotes for existing shipments to get new rates
• 31% of customers are currently negotiating contracts coming in 2023 with the usual one-year term
• 46% of customers are considering sustainability in their buying strategy for 2023 based on market intelligence
• In 2022, there is a change in price and thus the advantages previously offered by long-term contracts.

When asked about the current contract situation, the customers responded:

• 0% customers continue with existing long-term contract
• 6% of customers say none of the above describe their situation
• 12% of customers are trying to convert shipping volumes to short-term market prices
• 27% of customers renegotiated existing or planned long-term contracts in Q1
• 55% of customers are pushing through requesting quotes for existing shipments to get new rates

While most of the customers polled chose to continue with a new quote request for existing shipments, the customer feedback clearly shows that all customers are continuing to be flexible in the market and changing to optimize their value – exiting long-term contracts, requesting new quotes for available shipments, and renegotiating previously agreed long-term contracts. Shows the possibility of a reversal on several shipping routes – from the seller's market to the buyer's market.

Extending the question, customers are then asked about how long they negotiate for upcoming contracts. The answers stated:

• 14% of customers say they currently only use the spot market to negotiate upcoming contracts
• 14% of customers said they are negotiating a term of 3-6 months to match the downtrend
• 21% of customers said they would negotiate from 3-6 months as usual
• 21% of clients said they would negotiate a one-year deadline, with quarterly index-based adjustments
• 31% of customers said they would negotiate in a year as usual

With the majority of Xeneta customers continuing to negotiate a one-year deadline, as usual - Michael and Patrik highlighted the pressure other respondents are placing on sellers, with a portion currently only negotiating for 3-6 months or up to a year but with metric-based adjustment. Customer consensus shows that shippers are still trying to save as soon as possible and now have more influence to do so.

With the launch of the Carbon Emissions Index (CEI) – customers were polled about their interest in including sustainability in their purchasing process for the coming year. The results said:

• 7% of customers say they have no plans to incorporate sustainability in their shopping process at all
• 14% of customers are planning to include sustainability in their shopping by 2023
• 32% of customers are planning to incorporate sustainability in their procurement process with a clearly defined impact on the selection process
• 46% of customers are planning to incorporate sustainability in their buying process with just the basics.

With a lead of 46% of customers planning to incorporate sustainability into their purchasing process, the CEI index and its services have been warmly received by the Xeneta customer community. Sustainability has become a buzzword over the past few years (more so) and the shipping industry, despite its late entry – has shown its interest in improving the environment.
 

See more:

International transport and logistics market Week 51/2022
UNCTAD: Global trade forecast to decline worse in 2023
Container shipping lines will have to compete fiercely in 2023
 

Source: Phaata.com (According to Xeneta | Hellenicshippingnews)

Phaata - The first international logistics exchange in Vietnam

► Find Better Freight & Logistics Services!