Rates in Maersk’s key contract negotiations are increasing big-time, says Maersk CEO Søren Skou after the shipping line has fixed close to 40 percent of its new contracts for the year. At DSV Panalpina, CFO points to frustrated customers who are left footing the bill.
Spot rates are not the only element that is soaring these days, as months of record-high rates mean that container lines such as Maersk hold unusually strong cards in the contract negotiations that are taking place right now.
This also means that long-term contracts with customers increase significantly, and this could prolong the recovery for shipping lines even if spot rates start to go down again. Maersk has so far settled renegotiations for 40 percent of its contract portfolio, and CEO Søren Skou reports “significantly increasing rates,” he says at a press conference following publication of the shipping line’s annual report.
“There’s no doubt that contract rates are increasing, and increasing significantly. It’s difficult to comment on an overall basis. Generally, I can say that contract prices out of Asia are increasing considerably. From Europe to the US and such, there actually aren’t any noteworthy increases. There are a few increases but nothing special,” says Skou.
DSV sees customers hit hard
DSV Panalpina, which as a freight forwarder serves as an intermediary between customers and shipping companies, also takes note of the increasing rates. Not least in talks with the freight forwarder’s own customers, as they as go-betweens send the higher bill from the shipping lines directly on to those who need the goods transported.
“No one here has experienced this before to such a severe extent. We have of course seen fluctuations, but this is at a level that can almost ruin smaller companies, as they are unable to pay for the crazy transport costs,” says CFO Jens Lund in an interview with ShippingWatch.
Challenges are, in particular, that even though prices have increased, the service has not improved – rather the opposite, as bottlenecks and container shortages create queues that make it more difficult for shipping lines to arrive on time. “This means that you also don’t know when your goods will be delivered, as schedule reliability is at an all-time low. So now you have to pay four or five times as much for something, where the service is significantly worse,” says Lund.
However, he does not believe that the container lines can be held directly accountable for the current situation. “I don’t think there are bad intentions on their part. It’s gotten out of control, and I actually think they want to honor all the agreements we have with them. It’s also not in the shipping lines’ interest that this gets out of hand. We have a good collaboration with most of the shipping lines, and they want to help resolve the situation, because they know that tomorrow brings another day,” says Lund.
Source: SHIPPING WATCH
