[270111.EN.SEA] The Containership Company Shanghai Mulls Index Rate Tie Up

CONTAINER carrier start-up The Containership Company (TCC) is discussing the possibility with customers of directly linking freight rates to something like the Shanghai Containerised Freight Index to avoid carrier-shipper friction and contractual defaults. 

In talks with customers, "there has been a very positive response", said TCC marketing chief Lars Jensen, whose recently created container shipping lines runs a simple shuttle service from Taicang, 60 miles up the Yangtze from Shanghai, to Los Angeles.

"We are confident this will take off. It could be a major step in stopping carriers and shippers reneging on contracts. We need to get to the point where both carriers and shippers agree that an index such as the SCFI [Shanghai Containerised Freight Index] accurately tracks the market," Mr Jensen said.

TCC says it has already started talking to customers about using index-linked container contracts (ILCCs), which would see prices linked to an index like the SCFI.

This will, said Mr Jensen, stop carriers cancelling contracts if market prices increase, and shippers doing the same if they fall. Carriers and shippers wish to avoid situations when rates increase above the contract price and carriers refuse to move containers because they can get a better rate on the spot market, or have to put on surcharges to increase rates.

Other shipping lines are exploring solutions to the conundrum, reports London's International Freighting Weekly. Maersk recently told IFW it was mulling accepting financial penalties in its Asia-Europe contracts if it was unable to deliver the service it has promised.

Source : HKSG, 20.01.11.