Xeneta: Big Volume Shippers Not Enjoying Best Shipping Rates

Big volume shippers are not paying the best shipping rates, according to the findings of Xeneta, an Oslo-based benchmarking and market intelligence platform for containerized ocean freight.

In fact the analysis shows that over the course of the last 18 months, high-volume shippers are actually being locked in to unfavourable long-term agreements, leaving others to take advantage of the advent of low fuel prices, megaship capacities and hyper efficient supply change management.

“Volume no longer necessarily translates to savings,” comments Patrik Berglund, Xeneta CEO. “In fact, in many cases, big volume shippers are paying far above the current Asia-Europe or Asia-US rates.

“These businesses, which are often related to consumer goods, typically sign annual supply contracts with large vendors in order to keep merchandise in their stores, or to supply the giant EU and/or American retail chains. This provides them with supply chain stability, and predictability, but it also locks them into agreements that are fixed, and don’t always deliver value.”

To illustrate this, Berglund points towards the 2015 Far East Main Port – North West Europe Main Port Rates in the Xeneta platform, where he points to major differences between long- and short-term contracts.

Namely, for a 40’ container shipped as part of a long-term contract the mean market low was USD 1,175 and the average USD 1,696. Short-term prices were markedly lower, with a mean market low of USD 857 and an average of USD 1,355.

There was an even greater disparity between minimum prices, with the long-term low at USD 807 and an average of USD 1,535. This is compared to the same short-term rates of USD 240 and USD 571.

According to Berglund the difference suggests that the big volume shippers are essentially leaving money on the table with every container shipped. As a result, it seems the third party logistics (3PLs) firms are arguably becoming the real winners as shippers cut their logistics staff, and overheads, and look to outsourcing.

“We make it our job to have a detailed global picture of containerized freight rates. Any business that ships large volumes of goods should be aware of this prior to engaging in negotiations. Knowledge translates to bargaining power, and if the shippers are going to get the rates that their volume of business deserves then they need to have access to the best market intelligence,” he added.