Market distortion

“There’s a range of interesting developments on this trade which speak volumes about wider macroeconomic factors,” comments Peter Sand, Chief Analyst at Oslo-based Xeneta.

Sand explains: “The COVID years created a new reality for the ocean freight market, with strained supply chains and high demand distorting established patterns. As a result we saw a rush for dry units pushing up prices, to the extent that dry containers commanded a premium over reefers of USD 3 600 per FEU during June 2021. This was the peak, but the premium became a market feature from pretty much late 2020 through to the middle of 2022.”

Sliding away

However, after July 2022, Sand notes, Xeneta’s data shows a gradual ‘normalization’ of the dry/reefer relationship, with reefer prices edging back in front. Reefers have since commanded an average premium of USD 493 per FEU.

“What we’ve seen is both dry and reefer rates sliding consistently since summer of last year, as congestion eases, demand drops, and carriers tailor their networks to adjust to another new reality,” he says. “Reefer rates have dipped back below their dry counterparts once or twice in that period, but not since November 2022.

“With dry spot rates seemingly still trending downwards, as carriers scramble for cargoes to reach profitable filling factor levels, the spread now looks to be opening up. By early March reefers were commanding almost USD 1 000 per FEU more on the spot market. Those rates are now marginally above, but very close to, pre-pandemic levels.”

Blank balance
Sand adds that the shortage of reefer equipment that pushed prices to record levels “is no more” and notes that “for European exporters of refrigerated goods, this return to normal is welcomed.”

However, the sheer volume of blank sailings – around 30% on this major global trade route – is impacting upon plans.

“The return trip to the Far East is a fronthaul for reefers,” he concludes, “so if the ships don’t show up at all the exporters obviously face a challenge!”