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Under lock and quay
A “short-sighted” approach by shipping lines is driving the degeneration of relationships with their contract shipper customers that could harm them in the future, according to maritime consultant Drewry.
One of several shippers surveyed by the consultant said things had reached an all-time low.
“Relationships with carriers count for nothing these days,” said one large European shipper. “The carriers are very opportunistic and take high-rate spot shipments rather than contract shipments – it is all about money.”
Another respondent, a medium-size US shipper, accused carriers of “not honouring the MQCs” [minimum quantity commitments] of their contracts, thereby forcing them onto the spot market to find space.
“In the current under-supplied market, it is to be expected that newly empowered carriers set limits on how much volume they are prepared to allocate to contract shippers, who tend to pay less than spot shippers and NVOCCs,” said Drewry.
“It is also easier for carriers to implement peak season surcharges on spot business and NVOCC business,” added the consultant, which, through its bid management process involvement with BCOs, confirmed that carriers were “rejecting volumes awarded by shippers at the end of the annual tender process”.
It warned carriers that the behaviour of some towards contract business was “short-sighted”.
“As freight spend budgets and sourcing decisions are now on the radar in boardrooms across the globe, carriers should be careful not to impede the export business of shippers, on which they ultimately depend,” said Drewry.
Nevertheless, it also advised shippers they should “no longer expect that carriers have much spare capacity”, and accept that the container lines will set a price premium or availability condition beyond the agreed volume allocation.
“Carriers need shippers’ help to plan their capacity and equipment needs and to forecast pressure points better,” said Drewry.
In order to repair damaged relationships, it encouraged shippers and carriers to share information, to “have open communications” on, for example, long-term growth plans, and that the parties should align with key account managers. More robust vendor management processes and more reliable logistics planning were other recommendations.
During a Project44 webinar this week, Edward Aldridge, head of ocean freight at Agility Logistics, said there had been a “surge” of requests for quotes (RFQs) from shippers for annual contracts following February’s Chinese New Year holiday.
“There were delays in RFQs being issued prior to CNY as customers wanted to get that out of the way and see if the rates then weakened. Those delays became a surge of RQFs which, unfortunately, coincided with the Suez Canal blockage, which pushed rates up again,” he said.
Meanwhile pressure is growing on transpacific and Asia-Europe carriers particularly after a number of complaints to regulators from shipper bodies and associations.
Indeed, the European Shippers’ Council (ESC) continues to urge the EC competition and transport office to “take prompt action” to investigate the behaviour of carriers, and also claims the “special privileges” container lines enjoy under the Consortium Block Exemption Regulation are “insufficient to efficiently oversee the market”.
However, this week Alphaliner argued that tougher anti-trust action “will not stop freight rates from rising, as cargo demand exceeds liner capacity”.
It added: “More competition monitoring will not change the dynamics of the current market, where skyrocketing rates are simply a consequence of cargo demand exceeding maritime capacity. Prices are being pushed upwards by cargo owners with urgent shipments who are prepared to pay premium rates to obtain an empty box and a booking guarantee.”