US IMPORTERS, desperate for reliable shipping, are offering top dollar for long-term contracts that may not even be honoured as they try to ensure the arrival of their wares, reports Bloomberg.
Importers are accepting higher contract rates because they 'fear that the market can get even worse,' said Lars Jensen, CEO of Copenhagen-based Vespucci Maritime, a shipping market-analysis firm.
'Fear of losing out on capacity to some degree trumps fear of paying too much right now,' he said.
Contracts are typically negotiated on a yearly basis with importers and carriers agreeing to a minimum capacity level between certain ports, and the spot market used for freight shipped outside agreed terms.
But this year, importers are prepared to pay more, locking in higher, pandemic-era prices for two or even three years - despite some predictions they won't stay as elevated - in order to protect themselves from the volatile spot market.
The situation has completely changed how David Kunelius, president of Minnesota-based medical device company MedSource Labs, gets merchandise to the US from Asia.
'Pre-pandemic, we would set up shipping contracts for an entire year,' paying US$4,000 per 40-foot container, which allowed for planned investment in research and development, Mr Kunelius said. But starting last year, MedSource Labs was getting a new quote for cargo every two weeks, increasing by thousands of dollars each time to about $23,000 now.
Said Stephanie Loomis, vice president at freight forwarder CargoTrans: 'It's settling into the market now that the days of really very low, ridiculously cheap ocean rates are over.'
Larger freight forwarders are also signing multiyear agreements, and paying more for securities through add-ons, said Robert Khachatryan, CEO of Los Angeles-based Freight Right Global Logistics.
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Importers are accepting higher contract rates because they 'fear that the market can get even worse,' said Lars Jensen, CEO of Copenhagen-based Vespucci Maritime, a shipping market-analysis firm.
'Fear of losing out on capacity to some degree trumps fear of paying too much right now,' he said.
Contracts are typically negotiated on a yearly basis with importers and carriers agreeing to a minimum capacity level between certain ports, and the spot market used for freight shipped outside agreed terms.
But this year, importers are prepared to pay more, locking in higher, pandemic-era prices for two or even three years - despite some predictions they won't stay as elevated - in order to protect themselves from the volatile spot market.
The situation has completely changed how David Kunelius, president of Minnesota-based medical device company MedSource Labs, gets merchandise to the US from Asia.
'Pre-pandemic, we would set up shipping contracts for an entire year,' paying US$4,000 per 40-foot container, which allowed for planned investment in research and development, Mr Kunelius said. But starting last year, MedSource Labs was getting a new quote for cargo every two weeks, increasing by thousands of dollars each time to about $23,000 now.
Said Stephanie Loomis, vice president at freight forwarder CargoTrans: 'It's settling into the market now that the days of really very low, ridiculously cheap ocean rates are over.'
Larger freight forwarders are also signing multiyear agreements, and paying more for securities through add-ons, said Robert Khachatryan, CEO of Los Angeles-based Freight Right Global Logistics.
SeaNews Turkey