Buyers’ market seen as shippers drop long-term contracts

• All of Xeneta customers say they are abandoning their current long-term contracts to seek better terms

• 55% are pushing through with a scheduled request for quotation to get new rates while 31% are negotiating upcoming 2023 contracts for one year

• The poll indicates that the customers are emboldened by the spot price slide to demand better contract deals that could lead to a stable market

A buyers’ market looks to be emerging on the ocean freight sector, auguring well for stable rates in 2023, as all of Xeneta’s customers abandon their current long-term contracts for better deals, the box industry analytics and trading platform said.

Oslo-based Xeneta saw the hopeful signs during its customer-exclusive December Freight Market Pulse Webinar hosted by chief executive and co-founder Patrik Berglund and vice-president for customer solutions Michael Braun, who covered the year in review.

Gauging customer sentiment ahead of the upcoming tender season, the Xeneta executives received a consensus from emboldened customers that 0% of them would be staying with their existing contracts, analyst Molly Van Deursen wrote in a blog.

Van Deursen said the customers’ sentiment favors buyers in the freight market. She said the segment highlighted trades showing clear recent downward trends with the Asia-US, Asia-Europe and Europe-US routes as “the ones to watch”.

RELATED READ: Freight rates continue dizzying ascent – Xeneta

Key highlights of customers’ responses to Xeneta’s poll:

• 0% is staying with the current long-term contract
• 55% are pushing through with a scheduled request for quotation (RFQ) to get new rates
• 31% are now negotiating upcoming contracts in 2023 for one year, as usual
• 46% are considering sustainability in their procurement strategies for 2023 on an informative basis

Within 2022 there was a shift in pricing and advantages previously offered by long-term contracts. When asked about their current contract situation, the customers replied:

• 0% is staying with the current long-term contract
• 6% stated that none of the above described their situation
• 12% are trying to move volume to the short-term market
• 27% are renegotiating existing long-term contracts or planning to within Q1
• 55% are pushing through with a scheduled RFQ to get new rates

Van Deursen said while most customers polled chose to go for a scheduled RFQ, they clearly expressed “all were remaining agile in the changing market to optimize their value – breaking out of long-term contracts, pushing through with scheduled RFQ’s for new rates, and re-negotiating previously agreed long-term contracts”. This indicated a potential turning of the tables from a seller’s to a buyer’s market, she said.

RELATED READ: Long-term container rates track spot marketdip

She said the customers’ answers were telling when asked about the term of upcoming contracts they would negotiate:

• 14% said they’re using only the spot market to negotiate upcoming contracts
• 14% said they’re negotiating for 3-6 months to incorporate the downward trend
• 21% said they would negotiate for 3-6 months as usual
• 21% would negotiate for one year, with index-based adjustments on a quarterly basis
• 31% of customers said they would negotiate for one year, as usual

With the majority of customers going to negotiate for one year as usual, Braun and Berglund emphasized the pressure other respondents are putting on sellers, with a portion negotiating now for only 3-6 months or for up to one year but with index-based adjustments.

“The customer consensus reveals that shippers are still trying to materialize savings as soon as possible and are now having more influence to do so,” Van Deursen said.

She said with Xeneta’s launch of its Carbon Emissions Index, customers were polled on their interest to incorporate sustainability in their procurement process for 2023. The results were:

• 7% of customers said they weren’t planning to incorporate sustainability in their procurement process at all
• 14% are planning to include sustainability in their procurement in 2023
• 32% are planning to incorporate sustainability with a clearly defined impact on the selection process
• 46% are planning to incorporate sustainability exclusively on an informative basis

With 46% of customers planning to incorporate sustainability into their procurement process, the (CEI) index and its offerings have been well embraced by Xeneta’s community of customers and the shipping industry has shown its interest in improvement as well,Van Deursen said.