Shippers face tough year as 2022 contracts expected to break records

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  • Carriers plan to fix long-term contract rates at a much higher level than what they delivered in 2021
  • 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
  • The highest prices are from freight forwarders, though they are also offering some shippers competitive rates compared to the traditional carrier offerings

Shippers will have to prepare for tough negotiations as most of the 2022 contracts are expected to be at record-high levels, Xeneta data indicates.

Xeneta, a global ocean and air freight rate benchmarking and market analytics platform, said the coming year will continue to be a profitable market for carriers as they plan to fix long-term contract rates at a much higher level than what they delivered in 2021.

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
  • The highest prices are from freight forwarders, though they are also offering some shippers competitive rates compared to the traditional carrier offerings

On China to North Europe trade, the average of the bids that have come in is US$11,900 per FEU, a considerable increase for all shippers compared to 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. No one solution will fit all shippers, said the report.

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.

These same three price brackets can be seen on trades out of Europe to both the Far East and the US East Coast, though the range of prices is much narrower. Bids are on average coming in at $1,900 and $5,700, respectively.

“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,” said Peter Sand, chief analyst at Xeneta. “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.”

The importance of stability and predictability in global supply chains has been highlighted in the past year. Securing these will be the biggest priority for many shippers as they enter tough negotiations, Sand concluded.

Photo by Van Tay Media on Unsplash