New wave of contracts will lock in much higher shipping rates.

An in-depth interview with Xeneta’s Patrik Berglund on the unprecedented long-term contract market.“We’ve never seen this before. We’re going into a tender season that doesn’t look like anything else historically,” said Patrik Berglund, CEO of Xeneta, a company that tracks both long- and short-term ocean shipping rates.

Berglund was referring to the exceptionally lopsided advantage shipping lines wield in 2022 negotiations for long-term contracts with cargo shippers — the contracts that determine what American importers will pay over the coming year, and increasingly, multiple years.

“If you are a carrier and you hold all the cards, you can push all the levers in order to optimize your business,” said Berglund, who affirmed that carriers are indeed pushing all their levers.

Trans-Pacific spot rates rose to dizzying heights amid the COVID-era supply chain crunch, yet spot rates can theoretically fall very quickly. It’s in the long-term market, where shippers commit to quantities and prices over time, that liner companies can lock in extended gains.

What happens to one-year and multiyear contract rates is particularly crucial to liners, U.S. importers and ultimately, consumers of imported goods.

Read the full article here: new-wave-of-contracts-could-lock-in-shipping-cost-inflation-for-years