East-West Shippers Get Some Breathing Space

Ocean freight rates for cargoes moving under contracts on major East-West routes decreased by 6% between March and July, enabling hard-pressed shippers to reduce their costs, according to the results of Drewry’s Benchmarking Club.

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, despite the recent strengthening of ship load factors, Drewry reports.

“The reduction in average East-West contract rates follows the renewal in May of many transpacific contracts, at lower rates,” said Philip Damas, director of Drewry Supply Chain Advisors, the logistics consultancy arm of Drewry.

Drewry believes that the ongoing decline in contract freight rates is largely driven by the reduction of container carriers’ own unit costs, as well as the tendency of shippers to centralise their contract negotiation tenders.

The Benchmarking Club comprises shippers with annual freight volumes ranging from 5,000 TEU to more than 300,000 TEU. Drewry claims that through the Club members can confidentially compare their anonymous contract rates with those of other shippers.

They are also able to make comparisons against predefined categories of small, medium and large shippers who are moving cargo on the same routes.

This announcement is the first such information on contract rate trends since the Benchmarking Club was started in early 2014.