News / TPM24: Contracts: shippers and forwarders wary of usual 12-month deals

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The annual transpacific contract tender bartering season is in full swing at the S&P Global TPM24 conference and networking event in Long Beach, California.

The meeting rooms and halls of the vast venue are populated with formal, informal and sounding-out conversations on rates and routings for Asian container imports for the traditional May to April 12-month period.

However, this could be the year when the timeline of those contracts is reset – perhaps for good.

Indeed, ahead of those meetings, several shippers told The Loadstar they felt the lines were being unreasonable in their first rate increase requests.

And some indicated that they would look to sign for a shorter duration in order not to commit at too high a rate level for the second half of the year, when analysts are predicting rates will fall sharply against a background of the huge influx of newbuild tonnage.

Although there has been a gradual erosion of container spot rates over the past month, Xeneta’s XSI spot average for Asia to the US west coast, at $4,433 per 40ft, remains 170% higher than the December reading, while current US east coast spot rates, at an average of $5,778 per 40ft, are 133% higher.

The Red Sea disruption spike in short-term rates, directly and indirectly impacted by the vessel diversions around Africa, have provided carriers with an elevated start point to pitch their offers.

The view of most of the BCOs, NVOCCs and forwarders The Loadstar has spoken to over the first few days of TPM24, is that they recognise carriers are incurring more cost in their operations as a consequence of the Houthi attacks.

Nevertheless, the consensus of opinion from procurement managers and accompanying executives was that the ask from the carrier account managers should “be reasonable”, and be backed up by improved service levels and space guarantees.

“We won’t sign for a year if the offer is too high; and we don’t want to just agree a three-month deal because, more or less as soon as it commences, we will need to start the tender all over again,” the regional director of a major global forwarder told The Loadstar.

“I think that, in the case of a high offer, we will look for some sort of compromise for, say, a six-month deal with a review after five months,” the regional director of another major global forwarder told The Loadstar at a post-conference event on the first evening.

Another BCO at the same event was in a more fortunate position, as her transpacific contracts buck the tradition of the tradelane and run from January to December.

“We were very lucky to be able to tender in December for the year and the new deal has benefited us massively from the low spot rates at the time,” she told The Loadstar.

Carriers are negotiating the Asia-US west coast agreements on the back of more demand from a combination of consumer resilience and a shift of cargo back from the east coast.

But notwithstanding Panama Canal restrictions and the re-routing of Suez Canal loops, shippers remain concerned about the possibility of a strike, or even the threat of industrial action, when the current six-year employer agreement with the ILA union, covering the US east and Gulf coast ports, expires on 30 September.