09 April 2016

[090416.EN.BIZ] Big Volume Shipping No Longer Translates Into Big Value Rates: Xeneta

XENETA, a benchmarking and market intelligence platform for containerised ocean freight, says big volume shippers are not paying the best shipping rates.

Over the last 18 months, high-volume shippers are actually being locked in to unfavourable long-term agreements, leaving others to take advantage of low fuel prices, mega ship capacities and hyper efficient supply change management.

"Volume no longer necessarily translates to savings," said CEO Patrik Berglund. "In fact, in many cases, big volume shippers are paying far above the current Asia-Europe or Asia-US rates.

"These businesses, which are often related to consumer goods, typically sign annual supply contracts with large vendors in order to keep merchandise in their stores, or to supply the giant EU and/or American retail chains. This provides them with supply chain stability, and predictability, but it also locks them into agreements that are fixed, and don't always deliver value."

To illustrate this, Mr Berglund points towards the 2015 Far East main ports to northwest Europe main port rates in the Xeneta platform. Here, he notes, there are major differences between long- and short-term contracts, a company statement said.

For a 40-foot container shipped as part of a long-term contract the mean market low was US$1,175 and the average $1,696. Short-term prices were markedly lower, with a mean market low of $857 and an average of $1,355.

There was an even greater disparity between minimum prices, with the long-term low at $807 and an average of $1,535. Compare this to the same short-term rates of $240 and $571.

"Big volume shippers are essentially leaving money on the table with every container shipped," said Mr Berglund.

"Some shipping lines are benefiting of course, but it seems the third party logistics (3PLs) firms are arguably becoming the real winners here" making their significant margins from short- and long-term agreements and carrier kickbacks."

Source : HKSG.

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