Companies negotiating annual container shipping contracts with shipping lines before the end of the first quarter can expect increases in peak season surcharges and decreases in allowable free time with the container, as shipowners gain leverage from increased demand, industry participants say.

The widespread shortage of empty containers in Asia will compel shipowners to use their greater bargaining power to finally slash free time, the number of days a beneficial cargo owner is given to return a container to the owner, Stephanie Loomis, Vanguard Logistics Services vice president, said during a panel discussion at the virtual TPM conference.

“I expect that to be across the board. For years they’ve always threatened that they are going to pull back on giving free time given to BCOs,” Loomis said. “I think they are so strongly in the drivers’ seat this year that this may finally be the breakthrough.”

Contracts that were settled early between some shippers and shipowners had their free time cut from around 10-14 days down to six-seven days, M&R Forwarding and Multi-Container Line General Manager James Caradonna said in the panel discussion.

“It’s about carriers having a greater ability now to control their assets,” Caradonna said. “The more turns they get on the equipment, the greater the return on the investment for them.”

But Loomis said this change is not unreasonable considering that equipment shortages and port congestion that have led to widespread delays on cargo delivery, particularly for trans-Pacific trade lanes.

“In order to put some pressure on rate levels not going too high, the best thing you can do is give something back to the carriers that will in turn help them,” Loomis said. “The days of having 14 or 21 free days on a container, you can do better.

Source: Sp Global