Carriers that lag behind the market in increasing their rates are not rewarded when the market conditions change unfavourably.
Sea-Intelligence has recently investigated if carriers being less aggressive in terms of rate hikes while the market rises would result in more loyalty from customers when the market falls.
One of the most significant issues in container transportation is the inability of shippers and carriers to enforce their contracts. With freight prices rising rapidly, as they have recently, there are calls for carriers to keep to contracts and limit their chase of revenue.
Such calls implicitly presume that shippers will reciprocate when the market inevitably falls, explained Sea-Intelligence.
As Sea-Intelligence noted, during the pandemic, Maersk’s global average rate increased much slower than the market’s.
However, as interest rates began to fall, Maersk saw a reduction that matched the market decline, implying that there was no quid pro quo from the shippers.
At the other end of the spectrum, ZIM gained revenue of $4.2 billion, by increasing rates faster and higher than the market.
“There is clearly an asymmetry in loyalty. Carriers who raise their rates at a slower pace are not rewarded similarly when the market turns negative,” noted Alan Murphy, CEO of Sea-Intelligence.
“From a carrier perspective, it is better to increase rates as fast as possible, rather than to hope for shipper loyalty when the market turns.”
Recently, Sea-Intelligence reported that spot rates have continued to soar this week, making shippers concerned about how high rates may persist.
