- Shippers vie for secured space, carriers levy MQC requirement
- Carriers pushing for multi-year deals, full-scale offering
- Contracts may include less free time, higher penalties
Early term contract discussion ranges for 2022-23 have risen significantly in the containers market, market sources told Platts, despite shippers hoping that spot rates would cool off in the coming year.
Unrelenting bullishness
Rather, early negotiations for the upcoming contract season, starting April, point to an unrelenting bullishness as the discussed price range is sharply higher than the current year, by between 20% and 100%.
“Some rates for Europe (from China) are between $5,000-7,500/FEU. For 2021-22, it was at $2,400/FEU, in 2019, it was about $1,800-$2,000/FEU. For Trans-Pacific East Bound, the initial indication for large BCOs (Beneficial Cargo Owners) are ranging from $5,300-$6,300/FEU,” according to Peter Sundara, global head of ocean freight at a major cargo owner.
In 2021-2022, BCO contracts concluded at $3,000-$3,300/FEU for US West Coast and $4,500- $5,100/FEU for US East Coast, Sundara said.
“Negotiations for China-US trade are taking place at $4,000-$5,000 per FEU but this will most likely apply to the MQCs (Minimum Quantity Commitment) and the rest of the volumes will be booked in the spot market,” according to Dave Li, branch manager, Chongqing City, for T.H.I Group Limited.
Although it’s a bit early to say where the majority of rate levels will settle for the trans-Pacific trade, currently we see an 80-90% increase in the rates and final price at $5,000-$6,000 per FEU, a North American co-loader source said.
Carriers shift focus in 2022-23 term negotiations
Carriers have started negotiations earlier than usual, and are even participating in discussions with mid-size forwarders, unlike in the past. However, some in the industry are shying away from long-term deals, sources said.
“The focus of some carriers will be on long-term contracts, like Maersk is very open about it, they want to offer maximum volumes to the BCOs and long-term contracts, but Hapag-Lloyd tells customers to go to spot markets. So, it depends on the carrier; Maersk is very reluctant to offer spot bookings,” according to Rakesh Pandit, co-founder and CEO at CONBOX Logistics Private Limited (India).
Even for long-term contracts, many careers require BCOs to ship large volumes, sources said.
Last week, one major carrier was quoted saying they will only consider BCOs that ship 100 or more TEUs per week, according to John D. Reiser, vice president, Global Supply Chain, at Cannon Group, Incorporated.
This means the NVOs will still play a dominant role for smaller BCOs in contract season even though we are hearing Sea Shipping Lines like Maersk will stop working with NVOs and create their own internal NVO like division, Reiser added.
“Companies my size [2,600 TEU per year] will find it more difficult to receive fixed rates like we were able to in 2021,” Reiser said.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Platts
