Drewry: Ocean freight contract rates rise in Q4

The London-based shipping research and consulting firm said many European importers have received annual carrier bids for contracts effective from January, with higher fixed rates than in 2016.    Ocean freight rates for cargo moving under contracts on major East-West trade routes ticked up three percent in the fourth quarter of 2016, compared to the third quarter of 2016, according to Drewry.
   The London-based shipping research and consulting firm said its Drewry Benchmarking Club Contract Rate Index rose after six consecutive quarters of falling rates.
   The index is based on average transpacific and Asia-Europe contract freight rate data provided confidentially by 50 multinational retailers and manufacturers that closely monitor their contract freight rates.
   Maersk Line Chief Commercial Officer Vincent Clerc also told investors during a presentation this week, “Some of the fundamentals seem to point toward a correction on the freight rates or at least a correction on the supply and demand.”
   “2017 will be the first year of increasing contract rates since 2010 and this could come as a shock to some logistics managers who had got used to deflationary international transportation costs year after year,” said Philip Damas, head of the logistics practice of Drewry.
   Rates will increase, despite shipping over-capacity continuing to be severe in 2017, Drewry projects. That may sound like a paradox, but Drewry said, “Factors such as the higher prices of fuel, the previously unsustainable level of rates and the Hanjin bankruptcy are now weighing heavily on pricing.”
   Drewry said some of its beneficial cargo owner customers are concerned that the rapid consolidation of the ocean carrier industry – which has moved from the “top 20 global carriers” to a smaller group of “top 14 carriers” – will substantially change the bargaining power of carriers.
   However, Drewry noted that its “e-Sourcing Ocean Freight Solution” and benchmarking tools have enabled exporters and importers to mitigate increasing ocean transportation costs and carrier financial risks.
   Many European importers have received annual carrier bids for contracts effective from January, with higher fixed rates than in 2016, Drewry said.
   “We expect that ocean contract negotiations in the next few months – including the transpacific ones in March-April – will be tougher for shippers and also more complex, so exporters and importers need to be equipped with the best data, sourcing technology, practices and market insight,” Damas said.