Earlier this month, the Danish container shipping line published details about the new standardized contracts on their website.
Maersk now offers six standard products for the 2022 tender season; Flat, Seasonal Preset, Seasonal Sync, Block Space, Flexible, and Unlimited.
Based on the details on the website, Maersk’s Flat Contract is designed for stable ocean logistics needs, with which the company reserves space for the client’s cargo following a set schedule.
The Seasonal Sync is for production-driven supply chains that have a need to synchronise allocation with production fluctuations. The plan allows purchase between 10 and 50% fluctuation freedom from the weekly baseline. This fluctuation freedom can be utilized via forecast until 2 weeks prior to departure.
The price range of the contracts is not shared.
Head of Ocean Products Johan Sigsgaard writes in the announcement that individual customer agreements had long dominated the Ocean contract space, “causing some confusion over terms and conditions while not being able to solve all needs”.
Therefore, Maersk is promoting the more rigid approach to contracts as a means of offering a sharp, easier to understand palette of products that “eliminates procurement administration and gives [customers] autonomy through digital (live) data and 24/7 service access”.
Photo: Slawos, CC BY-SA 3.0, via Wikimedia Commons
Freight forwarders turned away
Another aspect of the standardised contracts that applies to freight forwarders is the fact that middlemen are being pushed aside.
The Loadstar quotes a New Zealand based freight forwarder who was turned away by Maersk’s subsidiary Hamburg Süd, saying the company is “moving away from freight forwarder involvement from 1 January”.
At the same time, Dutch website Nieuwsblad Transport magazine reported on a very similar experience global freight forwarder Transitex had with Hamburg Süd:
“In connection with the ‘strategy change’ to be implemented on 1 January at Hamburg Süd, it makes little sense to create another account” – the article reads.
This approach hasn’t necessarily come as a surprise. In the middle of October, Maersk was expected to announce that it would only handle cargo from direct shippers from 1 November, cutting out freight forwarders.
An official statement hasn’t happened since, but freight forwarders’ reports seem to confirm the change in the policy.
Spot rates vs seasonal contracts
As the coronavirus pandemic and its consequential impact on supply chains became more acute, spot rates increased at an unprecedented pace. So much so that French CMA CGM announced in September that it would not increase rates any higher until February 2022. At that time, the cost of shipping a 40-foot container from Shanghai to Los Angeles was nearly eight times higher than pre-pandemic levels, according to the Drewry World Container Index.
No wonder then, that some shippers welcomed the news about a predictable contract scenario.
Vietnamese Global Logistics Service (GLS) business analyst Minh Hieu Logi wrote on Linkedin that GLS is thinking likewise about predictability after the pandemic, and “[they] hope that Maersk will succeed,” he added.
Container shipping consultant Lars Jensen also welcomed Maersk’s announcement on Linkedin, saying “the industry ought to be moving in a similar direction”. However, he also warned about the framework’s sustainability once the market normalizes.
“The extreme unreliability of schedules and available sailings” also raises some concerns, as American Integrated branch manager Alex Holmes commented below Jensen’s post.
“These fixed, seasonal, flex all make sense if there is a ship every week and that calls on time and departs on time. It is a whole other proposition when a shipper does not know when the ship will berth, when they can pull an empty, when the ERD is or if the ERD and cut-off are updated TO THAT VERY DAY of the day the update is being made,” wrote Holmes.
Bearing in the mind the congestion we’ve seen at ports in California and Felixstowe in recent times, Holmes’s point appears valid.