Drewry Advises BCOs on Contract Freight Rate Rises


Drewry has warned beneficial cargo owners (BCOs) that they need to re-think their contract negotiation strategy for freight rates after the price to move their products by container increased for a fourth consecutive quarter.

According to actual contract rate data from the Drewry Benchmarking Club, average contract rates on two major container trade routes – from Asia to North Europe and North America – have increased by another 4% between the second and the third quarter of this year (shown in the graph below).

This means that the latest Drewry Benchmarking Club Contract Index has increased by 39% in the year to the third quarter, based on $2 billion of ocean freight spending.

Read 'The Great Freight Rate Race' by Holman Fenwick Willan to learn about why many shipping lines suffered from poor financial performance in recent years despite persistent volume growth.

According to the global shipping consultancy, BCOs can mitigate rate increases by incorporating benchmarking and e-sourcing best practices such as eSOFS in their tender management process.

Full benchmarking data on freight rates, detention and demurrage conditions and transit times are available to shippers within the benchmarking group if they meet the group’s non-disclosure agreement clauses.

Under the group’s rules, Drewry is allowed to disclose in public only high level summary index numbers.



Philip Damas, Head of Drewry’s logistics practice, said: “The container shipping market has seen a sustained, radical reversal away from the previous, long deflationary trend.

“Not only are freight costs increasing, but rapid consolidation in the supplier base, changes in supplier behaviour and new developments in tender technology will bring real change and uncertainty to the ocean transport procurement environment.”

Read more: CMA CGM shared an impressive first half results for 2017, with a strong increase in shipping volumes driving revenue to US$ 5.55 billion

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