GSCW chat: Shippers face big risks from trans-Pacific contracts

container shippingXeneta CEO Patrik Berglund explains how carrier negotiating power has changed the annual contracting equation.

container shipping

This fireside chat recap is from Day 1 of FreightWaves’ Global Supply Chain Week. Day 1 focuses on maritime.

TOPIC: Changing landscape for annual trans-Pacific contracts

DETAILS: U.S. importers face unprecedented conditions as they negotiate annual trans-Pacific contracts for 2022. What degree of rate hikes should they expect, and how will annual contracts evolve in the long term?

SPEAKERS: Patrik Berglund, co-founder and CEO, Xeneta, and Greg Miller, senior editor, FreightWaves and American Shipper

BIO: Berglund heads Oslo, Norway-based Xeneta, an ocean and airfreight rate benchmarking and market analytics platform. Prior to co-founding Xeneta in 2012, he worked for several years at Kuehne + Nagel and was also the co-founder of logistics consultancy Nordilog.

KEY QUOTES FROM BERGLUND:

On the spread between the lowest long-term rate and the highest spot rate: “We see an unprecedented spread. … These are ridiculous numbers. … What that means is that the ones being penalized the most and struggling the most are the smaller importers, and the longer this situation goes on, the more favorable it is — even though it’s painful — to the big-volume shippers.”

On when spot rate will fall: “If I ask around in the carrier and forwarding community and the shipper side, there is an expectation that the [spot] market should soften as we go toward the end of the year, and some people even claim the market might see a [sharper] drop-off. But my personal opinion is that the carriers and the three alliances will fight back to avoid the market trending down too much. And there are still too many efficiencies [in the supply chain], so I would say it’s more likely to plateau than to drop.”

On risk that rates on long-term deals may be too high if spot rates fall: “A 12- or 24-month contract comes with a substantial risk that you might look like a fool 12 or 24 months down the line.”

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