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Big east-west shippers see 2015 contract rates fall as much as 14pc: Drewry

OCEAN freight rates for cargo moving under contracts on the major east-west trade routes saw another reduction in the last quarter of 2015, according to Drewry's Benchmarking Club.

"As expected, contract rates reduced further through the latter part of 2015, as the effect of falling fuel costs and continuing overcapacity weakened market rates,?said Philip Damas, director of Drewry Supply Chain Advisors.

"Given the volatility of rates in both the spot and the contract market, more shippers are turning to Drewry's Benchmarking Club to ensure that they are securing the best rates in the market,?he said.

The benchmarking club is a closed user group of multinational retailers and manufacturers who closely monitor contracted rates, noted the American Journal of Transportation.

The club's Contract Rate Index, based on transpacific and Asia-Europe contract freight rate data provided confidentially by shippers, declined five per cent between August and November, another fall on top of the sharp decline we saw during the third quarter.

Bunker costs fell from the fourth quarter of 2014 and this contributed to a reduction in contract rates negotiated over the course of last year.

The fall in the Drewry Benchmarking Club Contract Rate Index between February and November 2015 was as much as 14 per cent. This trend was also reflected in the spot market.

Another driver of declining contract rates was the result of carriers granting shippers temporary reductions to secure cargo.

Drewry notes that a small number of shippers are using spot market rates for a proportion of their volumes. "We advise some caution with this approach as volume and space guarantees are not normally warranted which may pose a risk, especially during peak periods," Drewry said.