Is it best to strike a deal quickly or to let the clock run down a bit before signing 2024-2025 contracts with the container shipping companies? Here are our recommendations for getting the best deal in the new contract negotiating season.
It has escaped no one that the summer holidays are over. Companies are busy with their next year's budgets. The weather has turned, and additional lines and columns have been added to the Excel spreadsheets, as they are each year. In the container shipping sector, meanwhile, the arrival of autumn traditionally marks the start of the annual contract negotiating season.
From the shippers' point of view, the task is to move at the right time to get the rate they want for their current and future cargo transportation requirements. Agreement is generally reached after three rounds of tendering and sometimes four for the most keenly fought over cargo lines.
A colossal and difficult task
For the shipping companies and their clients, this operation requires a colossal amount of data processing and heavy pressure to arrive at a result which is almost always imperfect. Shipping contracts are highly fastidious and sometimes unpredictable because of the possibility of major external events occurring during the life of the contract (incidents involving force majeure, for example).
Container shipping contracts are characterised in the first place by the extreme difficulty they cause shippers as they try to draw up accurate forecasts of their annual volume transport needs, taking account of seasonal variations. As for the shipping companies, the challenge they face is to match capacity to demand in real time, both in terms of empty containers and services offering early sailings. In reality, the shippers too often exaggerate their cargo volume requirements and have only a rough idea of their capacity requirements, while the shipping companies and big forwarders are quick to forget their initial contractual obligations.
Nevertheless, after the pandemics, wars and multi-form disruptions of service we have experienced in recent years, it has been confirmed that, whatever happens in the market, it is always better to have a contract, albeit an imperfect one, than not to have one at all. Last year was marked by a sharp fall in freight rates, which lasted until the autumn, and a return to lower transport costs for the shippers. The attacks carried out by the Houthis in the Red Sea reversed the trend, however, particularly on Asia-Europe routes, and put an end to the abnormal situation which had resulted in spot rates being lower than contract rates.
Against this background, let us look now at the market factors that shippers need to take into account in their 2024-2025 contract negotiations with the shipping companies.
CONTENTS
- Factors unfavourable to shippers
- Factors favourable to shippers
- Our conclusions
- Our recommandations
TO LEARN MORE
Watch the replay of the webinar from October 9th: “Shipping tenders 2024-2025: how to prepare for a changing market”. During this session, our experts shared their practical advice on how to approach the tender season with confidence.
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