There will be many changes in how ocean freight is purchased in 2011, because of carrier and shipper experiences during 2010.
Rates are the most visible result of freight/service contracts, but there won’t be as much pressure on rates in 2011 as there was in previous years. I believe rates peaked in most trade lanes by late 2010, so shippers will want to minimize any cost increase surprises. Carriers will seek to maintain their market shares at newly profitable revenue levels.
Shippers will no longer accept standard carrier boilerplate contracts, especially when it comes to automatic general rate increases or other clauses that could unilaterally change agreed negotiated rates. Transit time, rotation and other service profile matters will take higher priority in contract agreements. Carriers will listen because they want to ensure maximum usage of their ships.
That doesn’t mean there won’t be pushback from carriers. Rationalizing capacity and slow-steaming have proved to be excellent tools in reducing costs, and have helped carriers overcome the horrendous financial results of 2009. However, carriers purchase ships to deploy them, not to lay them up in sheltered harbors. New ships — at a few hundred million dollars each — only earn revenue when they are sailing with cargo aboard.
Shippers’ worst fears were reached with the unprecedented uniformity of pricing actions in 2010 — some permitted legally by joint agreements, others enacted in follow-the-leader pricing practices. While these pricing coincidences have invited legislation to eliminate carrier antitrust immunity, changes won’t happen for a few years yet. More immediately, shippers are seeking to amplify their voice in dealing with ocean carriers, such as by forming or joining shippers associations.
Both shippers and carriers will make major changes in how freight is bought and sold in 2011, and we should finally see more balance to freight service contracts.