Container contract rates may take it on the chin next year because of a spot market that has been depressed by lowered port congestion and inflation-tempered consumer demand, according to market analysts. Since late October, spot rates the Baltic Exchange’s Freightos Baltic Global Container Index has plummeted by 90% to reach $2,165 per feu on Thursday.

The plunge has been most pronounced on the transpacific. “Improved congestion levels at the ports of Los Angeles/Long Beach — with waiting ships now in the single digits — meant more active capacity that, along with declining demand, contributed to the steeper rate decrease compared to other lanes,” Freightos research lead Judah Levine said on Thursday in a note. And contract prices may also plunge in reaction to the slumping spot rates, said Peter Stallion, head of air and containers at Freight Investor Services. “And whilst there is talk that for 2022 at least, carrier balance sheets will remain strong, there is fear of a reset in contract prices for 2023 which will crush earnings,” he said in a note on Thursday.

The prediction comes as inflation-slowed consumer demand also resulted in lower transpacific spot rates to the East Coast, but congestion and increases in volumes may have contributed to a slower decline than to the West Coast, Levine said. Transpacific prices to the US East Coast from China fell 71.5% to $6,026 per feu on Thursday, despite container ships diverting to Atlantic ports to avoid the port congestion on the West Coast. “In the last few months, many shippers have opted for East Coast destinations in order to avoid the peak season delays experienced on the West Coast last year, and to steer clear of possible port worker strikes, with stalled talks resulting in the first temporary industrial actions of the dispute late this month,” Levine said. “Some of the improvement in congestion on the West Coast can be attributed to a shift of volumes to Gulf and East Coast ports, where backlogs and delays have become and remain more problematic.”

The freight rates from Asia to northern Europe have also fallen considerably, dropping 57% in the past year to $6,287 per feu on Thursday. “Declining volumes driven largely by inflation pushed prices down,” Levine said. “Labor strikes at Felixstowe and Liverpool late in the month will likely contribute to congestion at alternate ports.”