Ocean freight rates for container cargo moving under contracts on major East-West routes decreased by 6 percent between March and July, according to Drewry’s Benchmarking Club
“The reduction in average East-West contract rates follows the renewal in May of many transpacific contracts at lower rates,” said Philip Damas, director of Drewry Supply Chain Advisors, the logistics consultancy arm of Drewry.
Contract freight rate data was provided confidentially by Asian, American and European retailers and
manufacturers to the Benchmarking Club, which Drewry created earlier this year. The Benchmarking Club comprises shippers with annual freight volumes
ranging from 5,000 TEU to more than 300,000 TEU. Through the club,
members can compare their anonymous contract rates with
those of other shippers. They are also able to make comparisons against
predefined categories of small, medium and large shippers that are moving
cargo on the same routes.
Drewry said it believes that the ongoing decline in contract freight rates is largely driven by the reduction of container carriers’ own unit costs, as well as the tendency of shippers to centralize their contract-negotiation tenders.
The London-based company said the data shows that shippers who
negotiate well with carriers can continue to reduce their multimillion-dollar
freight spend, despite the recent strengthening of ship load factors.
“Carriers often tell shippers that they have the lowest freight rates available in the market. But shippers can only confirm this if they join a specialized procurement Benchmarking Club. You need enough data and independent sources to determine how good your cost position really is,” added Damas.
Due to non-disclosure agreements with all shipper members of the Benchmarking Club, Drewry said it cannot share detailed cost data with companies that are not members of the Club. But it can provide a high-level East-West trades’ contract index. The announcement today is the first such information on contract rate trends since the Benchmarking Club was started in early 2014.
Drewry noted that most information about container shipping rates is based on spot rates. Drewry publishes the Container Freight Rate Insight and the World Container Index, and the Shanghai Shipping Exchange publishes the Shanghai Containerized Freight Index
. It said there is very little information about ocean contract freight rates.