New carrier-shipper contracts may secure price stability

According to Lars Jensen, CEO at SeaIntel, index-based service contracts will gain ground and secure price stability for both carriers and shippers. However, the propagation of these new contracts will take a long time and carriers are afraid of losing control of an important aspect of price fixing.

Photo: APM Terminals

A growing number of shippers of goods in containers link their service contracts with a freight index in order to obtain a bigger degree of price flexibility. Recently, the Federal Maritime Commission has mapped 61 contracts covering goods to and from the United States which are connected to indices. Index contracts make it possible to both carriers and shippers to adapt rates during the length of the contract meaning that none of the parties are punished disproportionately if market conditions change drastically. Furthermore, shippers and carriers with contracts based on indices will be more prone to enter into long-term contracts.

In an interview with ShippingWatch, Lars Jensen, CEO and partner of SeaIntel, estimates that contracts based on indices will gradually gain ground but it is likely to take several years.

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