Comments
Shippers (cargo owners) globally are engaged in tough negotiations with container shipping lines for annual contracts beginning January 1, amidst indications that most of the rate agreements will continue to be at “record high levels”.
As carriers reap the benefits of a great year with record profits; shippers are looking “to bring predictability and stability to their supply chain”.
The first round of ocean freight tenders reveal interesting insights, says Oslo-based Xeneta AS, a top ocean and air freight rate benchmarking and market analytics platform.
Value for money
Xeneta data for four trades show bids landing in three main price brackets.
The lowest bids are being offered by some carriers, but require shippers to agree to either extended contract periods or wider logistics agreements
The middle range is the more traditional carrier offers, while the highest prices are from freight forwarders, though they are also offering some shippers competitive rates compared to the traditional carrier offerings.
“For shippers, the question has to be; are there any real alternatives to agreeing to these record-high rates? Or are they at the mercy of carriers who are enjoying their current position of power?” says Peter Sand, Chief Analyst at Xeneta.
“However, given these much higher prices, shippers deserve much better service. This includes containers arriving within a reasonable time, at the desired port and at the agreed price,” he explained.
On the China to North Europe trade, the bid average has come in at $11,900 per forty-foot equivalent unit (FEU), a considerable increase for all shippers compared to the long-term contracts signed in 2021. There is, however, a large range in offers depending on who is making the offer and what the conditions are.
The China to US trade is in a much earlier tender process stage, with the market not yet settled. However, early indications show average bids of $5,700 per FEU.
“Though the absolute level of the long-term rates coming in may leave you gobsmacked, the fact that they follow the spot market should come as no surprise, as the long and short-term markets are correlated. While it may be tempting to go for the lowest price offered, differences in what is being offered mean the implications on the wider supply chain should be considered — with no ‘one-size-fits-all’ solution,” says Peter.
The importance of stability and predictability in global supply chains has grabbed headlines this year. Securing these will be the biggest priority for many shippers as they enter tough negotiations, according to Xeneta.
“However, it might be risky for shippers to enter into a long-term rate agreement without being fully informed and having data available to make those conclusions,” Peter added.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.