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Freight Waves

April 26, 2023

Lori Ann LaRocco

Uncertainty. It’s a word logistics managers have said so many times that if they had a dollar for every time they said it or wrote it in a sentence, they would have more money in their bank accounts than the ocean carriers. Ironically, this once nemesis for shippers has become its savior and an enemy of the carriers.

The murkiness of consumer spending along with bloated warehouses continue to impact ocean orders, which, of course, have slammed ocean freight rates. The cut in vessel capacity by the ocean carriers has not put a floor in freight rates, so the urgency to lock in a contract has not been as dire for shippers.

With no drastic changes in inventories or consumer spending on the horizon this contract season, the mix of contracts and spot rates is different. We all know beneficial cargo owners (BCOs) normally diversify with a mix of contracts and spot rates, but this contract season, the low rates have BCOs turning more to non-vessel operating common carriers (NVOCCs) to help them maximize the use of spot rates.

Paul Brashier, vice president of ITS Logistics, told American Shipper that low spot rates are just one piece to this unconventional ocean contract period.

“While the volume of containers being booked in the spot market is clearly a reflection of the rock-bottom rates being obtained by shippers in the spot market right now, there are two recent behaviors by BCOs influencing this market,” Brashier explained. “Many shippers took drayage services to request for proposal (RFP) as early as November of 2022. This signaled that a significant number of BCOs were not planning to contract with ocean liners per usual in March-April of this year and then hold their drayage RFPs in April-May.”

Read the full article here.