Ocean contract negotiations for cargo moving from Asia to the US are coming to an abrupt end. Negotiations in this market traditionally start in February and last until the end of April. The unprecedented demand in the market has drastically changed the negotiation timetable. Carriers have made it clear that shippers waiting to finalize contracts at the end of April in hopes of securing better terms will be terribly disappointed.
Locking in space commitments, not lowering rates, has been the driving force since formal negotiations started in February. Shippers failing to recognize the current environment will be subject to outlandishly high rates and the likelihood of zero contracted space commitments. The carriers have so much leverage that even shippers willing to pay the carriers’ target price are having their space commitments limited. Carriers are also advising shippers not to expect any miracles regarding additional space availability for the foreseeable future. All global trade lanes are experiencing strong demand. According to carrier executives, all available containerships that can be added to the Asia to US market have already been added.
Industry experts are united on their predictions regarding the state of the shipping industry. The turbulent market conditions will make it very difficult for shippers of all sizes to maintain their supply chain without disruptions. The one caveat is that shippers having longstanding carrier partnerships will be less prone to incur these supply chain disruptions.
The year 2020 was one of the most, if not THE most, volatile years on record for the shipping industry. All stakeholders struggled to find solutions that provided relief for their customers. Unfortunately, the year 2021 is shaping up to be more of the same if not worse.
