Welcome to GLA! Leading the global logistics alliance.

The new long-term contract will push the freight rate to a new height

Time:2022-02-15 Publisher:Kevin Num:3247

The freight rate price in 2022 is still at a high level, which is largely caused by the epidemic. This allows the shipping company to see the hope of huge profits.

Now some shippers say that the shipping company has a negotiating advantage in the long-term contract signed with it. This contract will determine the fees to be paid by the shipper in the next few years.

Patrick Berglund, CEO of xeneta, said that this is a puzzling situation and we may enter a strange contract season.

In fact, since the outbreak of the epidemic, the crisis of the supply chain has been emerging continuously, and the spot rate has risen to a frightening figure. One of the most prominent is the spot rate in the trans Pacific region.

Although the spot fee rate may be reduced, in the long-term market, if the freight forwarder's shipment volume is large, the shipping company can still get huge profits.

This is why the change of contract rate over one year is so important for shipping companies or freight forwarders.

The freight rate spread is getting bigger and bigger

Compared with last year's long-term contract, the price of xeneta has increased a lot this year.

Take the long-term rate of Asia US west coast as an example, it was $3000 / FEU last year. By October, the figure had doubled to $6000 / FEU.

However, before the outbreak, the average freight of the route was only $1500. Compared with the current $6000, the rate has increased by five times, which is a headache for small freight forwarders.

Berglund said the figure was exaggerated, and the price difference before the epidemic was up to $500. Today, the price difference is nearly 10 times larger than before.

Shipping companies conduct business directly with shippers

In the case of widening price difference, many small and medium-sized freight forwarders may not be the first choice of shipping companies. The shipping company may conduct business directly with the shipper.

Vincent CLERC, CEO of Maersk shipping, said on a conference call: "as we focus on long-term cooperative shippers, in this case, we will reduce the number of cooperation with freight forwarders."

"At present, the profitability of freight forwarders is very high because they mainly pay short-term market rates. But we decided to invest in long-term stable relationships," he added

Berglund said: "because carriers focus on small and medium-sized freight forwarders first - they obviously push these companies to their digital booking platform. Operators are actually saying that you can book space here, which is what we provide for you."

Prev：Welcome! Membership Renewal From KUWAIT, UGANDA, UAE—— Fusion Shopping Group (Include 5 companies)Next：Port congestion, the decline of scheduled shift rate and the crisis of strike, will the freight rate rise again?