IHSA Begins Ocean Contract Negotiations
The ocean shipping market continues to be very unstable as it has been since the beginning of the pandemic. In a short three-year period, shippers have been exposed to record high-rate levels, record low-rate levels, severe space limitations and fractured supply chains.
The instability in the Red Sea is the latest hurdle that shippers must now overcome. The majority of carriers have abandoned moving containerships through the Suez Canal. Carriers have opted instead to move cargo through the Cape of Good Hope. Due to drought conditions, carriers are also scrambling for a coherent strategy on moving cargo through the Panama Canal.
There are several issues IHSA will be monitoring throughout the negotiation process. How these issues unfold will likely affect IHSA’s final 2024-25 contract rate levels and terms either positively or negatively. Several key variables for transpacific shippers include:
- VOID sailings
- Panama canal water levels
- Middle East turmoil / Suez Canal
- ILA negotiations (east coast longshoremen)
IHSA’s current contract rates are substantially less than spot rates. We believe a major focus of the carriers will be to close the gap between the contract rates and spot rates. Our negotiation strategy will be to focus on building our carrier partnerships and secure long-term fixed contract rates. Carriers need volume to fill their vessels through 2025. Because of this, we believe carriers will offer more favorable rates and terms for contract cargo vs. spot rate cargo. Carriers have privately admitted that volume will be the key attribute to locking in the best overall rates and services for the 2024-25 contract period. Our goal is to have contract negotiations finalized by the end of March with new rates effective May 1.
If you are not already a member of IHSA, we urge you to consider joining. We believe that IHSA would be a valuable investment for your company. We have a proven history of success in helping our members reduce their shipping costs, improve their shipping efficiency and stay ahead of the curve on industry trends.
Please contact Rebecca Rice at rrice@shippersassociation.org for membership information.
