SIMIC

The contract rate reductions, which sources said are mostly running through the April 30 expiry of current deals, are a signal that some shippers largely prefer service continuity with existing carriers over a more chaotic approach of fishing for rates in the spot market.

Importers are locking in rates that are far below the US$6,000 to $8,000 per FEU, or higher, that they negotiated last spring.

Shippers say some carriers who earlier this year refused to increase their space allotments are coming back to them with offers of more space at rates which, although higher than the current spot rate of about $2,000 per FEU to the West Coast, are steeply discounted from the rates they signed for last May.

"We have renegotiated every contract we have," the logistics manager at an importer in the automotive sector said. "They [carriers] know no one is going to ship with them at those higher rates."

In a poll of about 300 of its customers in the major east-west trade lanes three weeks ago, rate index platform Xeneta found only 4 per cent of respondents said they were sticking with their current long-term contracts.

The "ultra-large majority" of shippers already have negotiated lower contract rates or are in the process of doing so, Michael Braun, vice president of customer solutions at Xeneta, said.

A carrier executive said most shippers are keen to avoid an all-out rate war that would end up fraying relationships they worked hard to establish with their core carriers during the Covid experience of the past two years.

"If anything, they [customers] learned that if rates go too low it's not good for anyone," the source said. "Let's keep the rates halfway normal."

Carriers over the past three months attempted to prevent a freefall in spot rates by cancelling, or blanking, sailings in the trans-Pacific.

With many of their existing service contracts having been renegotiated, carriers and their customers are beginning to look ahead to the 2023-24 contracts that will take effect on May 1. But they caution that the discussions are preliminary in nature and will not get serious until the New Year.