The traditionally resilient trade in reefers from Europe to the Far East appears to be slowly succumbing to the same market forces as the rest of the containerized ocean freight sector, with sustained declines in volume now being followed by spot and the long-term rate falls, according to the latest analysis by Xeneta.
The ocean and air freight rate benchmarking and market analytics platform noted that the spot rate on the leading fronthaul reefer route now sits at US$4,240 per FEU (as of January 23, 2023).
Role reversal
"After a period of almost two years defined by prices in excess of US$5,000 per FEU reefer container, a sharp fall in December has changed the character of the market, with spot rates now below-contracted prices for the first time since October 2019," Oslo's Xeneta said, citing its data.
It added that its crowd-sourced data also showed a current long-term rate just shy of US$4,500 per FEU reefer after peaking in September last year at US$4,850.
"Spot rates falling below long-term contracts is a classic sign of a weak market," said Peter Sand, chief analyst, Xeneta.
"This is one of the world's busiest reefer routes, with a strong rates track record, but even softening demand from China is the culprit here," Sand added.
The chief Xeneta analyst said over the 11-month period, Xeneta has witnessed a year-on-year fall in demand of 30% to China, equivalent to 115,000 TEUs.
"The only reason the overall loss to the Far East was less than this is that demand into North Asia and Southeast Asia actually grew by 7.2% and 2.6%, respectively," Sand said.
"These shifts saw China's overall share of the reefer business on the corridor fall from 51% in 2021 to 41% last year. Time will tell if this trend continues," he added.
Despite the declining rates, Xeneta's historical data shows that prices remain "relatively strong."
In the third quarter of 2019, long-term reefer contracts could be signed for "only" US$2,000 per FEU.
"So, there's unquestionably room for more movement here," Sand further said. "It'll be fascinating to watch the data and discover what comes next for both shippers and the carrier community."
