- Container box shippers and forwarders could be in for historically high rates and contentious contract negotiations.
- The negotiations are with carriers upon first quarter 2021 contract renewals and a shift from term to spot volumes.
- This scenario is due to the market norms brought on by the coronavirus pandemic.
According to a recent news article published in Platts, written by David Lademan, Spring contract season may solidify container carriers’ newfound pricing power.
Early negotiations
With the majority of annual term contracts set to be negotiated in early 202.
Many market players believe that high rates on many trade lanes and consumer demand seen throughout this year’s elongated peak season will push into 2021.
This caused contracted freight pricing to start at record levels.
Industry experts opinions
“I don’t think any shipper in their right mind would like to start these conversations this side of the Chinese New Year,” SeaIntelligence CEO Lars Jenson told S&P Global Platts. “Negotiations will be pushed back a little at least on the trans-Pacific.”
Spot rates dominant
The spot market currently accounts for less than half of freight moved on major routes.
But 2021 could see a rebalancing of cargo from term agreements towards spot purchases, as shippers hesitant to sign contracts look to take advantage of a possible market downtrend after the Lunar New Year.
The result would be medium- to long-term growth in the size of the spot market relative to contracted freight.
Annual contracts to play a key role
Annual contracts could be replaced with three-month to six-month rolling contracts, mostly to protect the supply side of the market, allowing carriers to revise contract terms if rates are supported or trending upward.
“I believe we will see various contract cycles with shorter term agreements versus longer term agreements” Bennett said, commenting on the various agendas that market players bring to the table during contract negotiations.
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Source: Yahoo News
