FEATURE | East-West contract rates help reduce shippers’ costs

Ocean freight rates for cargoes moving under contracts on major East-West routes decreased by seven per cent in the fourth quarter, according to Drewry.

The cost reduction, based on contract freight rate data provided confidentially by Asian, American and European retailers and manufacturers to the Benchmarking Club, shows that shippers who negotiate well with carriers can continue to reduce their multi-million freight spend on most East-West routes, despite the increases in bunker prices during the past year. A moderate fall in the Asia-Europe rates drove this decline.

“The latest reduction in average East-West contract rates is the largest quarterly fall since the end of 2016,” said Philip Damas, Director of Drewry Supply Chain Advisors, the logistics consultancy arm of Drewry.

More detailed analysis of contract rates available to retailers and manufacturers within the group shows very different rate trends depending on the trade route concerned. The Eastbound transpacific ocean transportation market has seen spot rates nearly double in the past year and a portion of this upwards rate pressure is being transferred to the contract market.

Based on recent bids of exporters and importers for 2019 contracts, there is some evidence that the market will witness some double-digit increases in contract rates on a number of secondary and north-south routes when 2019 contracts are signed in the next few weeks.

Based on recent bids of exporters and importers for 2019 contracts, there is some evidence that the market will witness some double-digit increases in contract rates on a number of secondary and north-south routes when 2019 contracts are signed in the next few weeks.

Besides running outsourced ocean tenders for exporters and importers, Drewry analyses average, minimum and maximum contracts rates as part of the tender process.

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