I strongly believe the most important change in 2012 will be the whole service contract negotiation process. The days of carriers and shippers or non-vessel-operating common carriers committing to large minimum quantity commitments over a yearlong commitment are coming to an end. We saw it in 2011 in the trans-Pacific service contract season, with both sides dramatically reducing the MQC and the validity of the length of the service contract. We saw the market changing not only monthly but also weekly and, in some cases, daily.
The key is having the mutual relationship between the carriers and the shippers and NVOCCs that if they make a booking, the carrier will have the space available, and the shipper or NVOCC will have the cargo show up and make the sailing it originally booked against. This is critical to both sides to be profitable and to continue growing together.
We’ll also continue to see a reduction in validity dates to protect both sides. In the past, you could sign a service contract at a certain rate for a year’s commitment, but as soon as the market rates began to fall, you’d have to go through the service contract amendment process to reduce the rates. Why not have the relationship on both sides that as the market changes both upward and downward, your rates will be in line with the market? I believe the whole industry would benefit if this trust could be established. Let’s face it, no one carrier or one shipper sets the market. It’s a blended average of all the players, and rates should be in line with current market conditions.
Change, in most industries, is usually a good thing, and I think we should embrace all the opportunities to make changes in areas that don’t work as they once did in the maritime industry.