News / 'Don't jump on early fixed-rate ocean contract offers', shippers advised

Photo: © Alexkalina | Dreamstime.com

Shippers should resist the temptation to lock themselves into annual ocean freight contracts too early, according to Flexport, as the current rate spike could be nearing its peak. 

During a market webinar, the digital forwarder said importers should avoid committing to the first contract offers by carriers, arguing that seasonal demand will ease from mid-August, and pricing should follow. 

“We expect we are now on top of the mountain, so we will see some stabilisation coming until probably mid-August,” said Guillaume Caill, head of ocean EMEA at Flexport.  

He added that from mid-August until China’s Golden Week in early October, Flexport anticipates that the “usual seasonality” will trigger a rate decline.  

“We see a declining wave in terms of price developments, and we do hope that by September we will also not have any space issues.” 

He explained that stronger-than-expected demand, early Christmas restocking and longer voyage times around the Cape of Good Hope had kept capacity tight through June and July, but the space constraints should ease by September. 

“Do not jump on the first fixed rate that comes to you,” advised Mr Caill. “There will be better opportunities coming up in September, normally.”

However, he warned that “a fixed contract is never totally fixed”, and recommended a mix of fixed, floating, and index-linked agreements. 

Meanwhile, BCO consortium ShiftX argued that today’s geopolitical volatility strengthened the case for long-term carrier contracts, rather than waiting for the spot market to soften. 

And while Flexport recommended shippers to delay commitments until seasonal conditions improved, ShiftX argued that predictability now carried more value than trying to time the market. 

ShiftX UK MD Keith Gaskin explained that the past five years had demonstrated that supply chain disruption had become structural, rather than cyclical, adding: “It’s not a question of if there’s going to be another global crisis affecting shipping; it’s when,” he said.  

ShiftX, which pools members’ container volumes to negotiate annual contracts with six major carriers, said long-term agreements had protected customers from the sharp increases seen on the spot market since the Middle East crisis escalated. 

Mr Gaskin acknowledged rates were likely to soften towards late August and September, but warned any decline could prove short-lived, with Golden Week, Chinese New Year, and continued geopolitical instability all likely to inject fresh volatility into the market.  

Flexport also cautioned that the geopolitical picture remained highly uncertain. It said “today, there is no safe passage in Hormuz”, while Red Sea transits remained well below pre-crisis levels, despite a small number of carriers cautiously returning services.

“We don’t foresee full-force return through the Red Sea before 2027,” it added.