CONTAINER lines are facing a crucial period in the last weeks of 2023, with significant implications for their bottom lines in 2024, reports New York's FreightWaves.
The urgency to elevate spot rates is paramount, as failure to do so soon could result in a substantial downward reset of next year's annual contract rates compared to the current year.
This looming scenario, which would adversely impact liner finances, is becoming increasingly likely.
Despite efforts to boost rates through general rate increases (GRI) this month to strengthen their negotiating position for annual contract resets, shipping lines have faced setbacks.
With time running out for a fourth-quarter rebound, the latest indexes indicate a decline in spot rates rather than an increase.
The December window represents the final opportunity for shipping lines to influence rates before the annual contract talks. However, their historical success in implementing GRIs has been limited.
Maersk CEO Vincent Clerc outlined the worst-case scenario during a conference call on November 3, emphasising that if the spot market does not see improvement in the fourth quarter, it would lead to a reset of 2024 contract levels to lower values.
Mr Clerc noted a significant disparity between contract rates signed earlier in the year, which are about to reset, and the current spot rates.
The outcome of the current quarter will profoundly impact the outlook for 2024, said Mr Clerc.
The global composite of Drewry's World Container Index (WCI) has declined six per cent in the week ending last Thursday compared to the previous week, reaching US$1,384 per FEU.
This downturn erases all gains since the beginning of Q4, with the global composite down one per cent versus October 1.
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The urgency to elevate spot rates is paramount, as failure to do so soon could result in a substantial downward reset of next year's annual contract rates compared to the current year.
This looming scenario, which would adversely impact liner finances, is becoming increasingly likely.
Despite efforts to boost rates through general rate increases (GRI) this month to strengthen their negotiating position for annual contract resets, shipping lines have faced setbacks.
With time running out for a fourth-quarter rebound, the latest indexes indicate a decline in spot rates rather than an increase.
The December window represents the final opportunity for shipping lines to influence rates before the annual contract talks. However, their historical success in implementing GRIs has been limited.
Maersk CEO Vincent Clerc outlined the worst-case scenario during a conference call on November 3, emphasising that if the spot market does not see improvement in the fourth quarter, it would lead to a reset of 2024 contract levels to lower values.
Mr Clerc noted a significant disparity between contract rates signed earlier in the year, which are about to reset, and the current spot rates.
The outcome of the current quarter will profoundly impact the outlook for 2024, said Mr Clerc.
The global composite of Drewry's World Container Index (WCI) has declined six per cent in the week ending last Thursday compared to the previous week, reaching US$1,384 per FEU.
This downturn erases all gains since the beginning of Q4, with the global composite down one per cent versus October 1.
SeaNews Turkey