Importers and exporters in the Asia-Europe and transpacific areas are likely to get shipping costs cut by 55% to 85%. This comes to light with the conclusion of annual tender negotiations by several BCOs/shippers for new transpacific contracts starting May 1.
If shippers (and Drewry bid experts), who deal with big ocean bids, are to be believed, this is no printing error. In the last 7 years, this is the biggest shipping cost drop year-on-year.
Details of region-wise and lane-wise cost reductions are kept confidential. However, detailed cost analysis is available with global routes and Drewry for shippers who want to know if they are going to save enough or should target more.
In South American or Transatlantic trade markets, several shippers are still grappling with long-term positioning. In those areas, rates have not yet returned to pre-pandemic levels. Here, the Drewry benchmarking support system can enable strategic decision-making.
During 2023 and 2024, when trading circumstances are getting difficult, logistics leaders have opportunities. Leaders can significantly contribute to their company’s bottom line with cost reduction.
Back in January, during the annual “Rate Outlook” webinar by Logistics Management Magazine, Drewry gave a presentation. It pointed to a prediction of at least a 50% year-on-year drop in contract rates this year. Plus, shippers could negotiate better terms and conditions for liquidated damages, payment terms, and other things.
Various shippers have saved a lot in terms of ocean freight costs with savings ranging from $10 million to $200 million. In some cases, the intense competition among NVOCCs and carriers has led to over 50% reductions with improved terms and conditions secured by shippers.
The most recent bid season has seen aggressive target rates set by BCOs. Some of the lowest target rates include $1,200 per 40ft container for shipments between Asia and the US West Coast. However, carriers don’t seem to have agreed to such low prices.
Shippers are getting better service this year, in addition to these lower costs. Transit times have reduced to half than the last year. In addition, port congestion at major ports has decreased in North America by 50% and in Europe by 60%.
Looking ahead, Drewry thinks that understanding the break-even cost of ocean carriers will become more essential for shippers. This will help set realistic goals while predicting whether such rates will cause some carriers to discontinue services.