The debate surrounding container ocean spot freight rates vs contract rates rages on stronger than ever as the decline in spot rates continues unchecked.. Despite aggressive blank sailings by many carriers on several routes, the decline in spot freight continues forcing contract rate customers to rethink their strategy..
Experts on either side of the rate divide analyzed the impact of spot rates and contract rates in the current period and where it is headed in an insightful webinar hosted by Shipping and Freight Resource and CHARLIE PESTI..
The panel consisting of Shabsie Levy – /Founder of Shifl, John D. McCown – Founder of Blue Alpha Capital, Stephen Nothdurft – Vice President, Sales, North America – MOL Consolidation Service, moderated by Hariesh Manaadiar – Founder of Shipping and Freight Resource debated the prevalence and credibility of spot rates, the impact of spot rates on inflation, who benefits most from spot rates and contract rates, and what drives pricing in the container shipping sector..
To refresh everyone’s memory,
Spot Freight rates are ocean freight rates charged by ocean carriers from port to port generally for one shipment, specific vessels, or in some cases a short date range depending on market conditions..
While currently, the spot rates are on a downward trend, it is important to note that spot rates do not have any guarantees as various events like bunker prices, blank sailings, port congestion, strikes, and many other factors can influence spot rates.. Spot rate customers are also the first customers likely to be sacrificed by carriers based on existing market conditions at the time of shipment..
Contract rates which are currently higher than spot rates on specific routes, refer to ocean freight rates with validity typically longer than 3 months or more, negotiated with ocean carriers based on a volume commitment or tier based, depending on the market, carrier, and customer..
Contracts are preferred by certain customers and definitely preferred by the carriers because this gives carriers base volume commitments while customers may have the option of protected space and equipment and shipment guarantees given by carriers..
