[170611.EN.SEA] Maersk: Multi-year Contracts To Trickle Down From Big To Small

DANISH Maersk Line Eivind Kolding has urged the container shipping industry to carry out changes for the long-term benefits of both carriers and shippers. 

"When we know that we have that business, then we actually can price it quite competitively, and then the customer will know that he will have a freight rate he can rely on," told Newark's Journal of Commerce, adding that long-term contracts would apply to largest shippers and then to medium-sized shippers.

He believed the practice of long-term contracts can help stabilise spot rates, which apply to most freight forwarders.

Next, he called for applying sophisticated Internet technology to ease booking and offer more updated information for shipping containers. This helps smaller shippers obtain the needed information more quickly so that they can be more responsive to any change or contingency.

For larger shippers, he said they can be linked with their carriers through the Electronic Data Interchange (EDI) system, or other data interchange platforms with their carriers.

Therefore, he urged the carriers to develop technology that is user-friendly and customer-centric.

Mr Kolding said his intention is to motivate the dialogue between carriers and shippers to shift the attention from freight rates to more significant topics in terms of betterment of service and reliability, as well as the lowest environmental impact on supply chains.

He pointed out that the industry should provide reliable services at reasonable rates, and long-term carrier-shipper contracts for up to three years help to reduce the volatility of rates.

Further, he called for greater visibility into carrier's environmental protection scheme. 

He believed increased visibility into the amount of a carrier's carbon emissions would be an impetus for a shipper to choose its carrier because of the prevalence of demanding greener supply chains in the retailing sector.

But huge controversies may be seen on his suggestions of imposing additional surcharges to shippers.

He put forward that a system of "load protection fees" be launched so that carriers can assess on the 30 per cent of containers booked by shippers but turn out to be withdrawal without prior notice.

Besides, he suggested levying fees on shippers that fail to meet their volume commitments beyond a 10 per cent deficiency.

Source : HKSG.