Global Shippers Forum Gears Up for 2025 Contract Negotiations
As logistics managers and major shippers prepare for the annual contract season negotiations across Europe later this year and on the Pacific in spring 2025, the shipping industry braces for another volatile season. Shippers, having endured a turbulent five years, are now turning to new tools to gain much-needed market transparency.
GSF’s New Arsenal of Data Tools
James Hookham, Director of the Global Shippers Forum (GSF), will address the FIATA World Congress in Panama today, unveiling a series of new reports and indices developed in collaboration with MDS Transmodal. These new tools aim to provide cargo owners with the data they need to navigate the unpredictable market and strengthen their positions during the upcoming negotiations.
Shippers have taken multiple hits in recent years. Events like the Covid-19 pandemic and the temporary blockage of the Red Sea shipping lane led to unprecedented freight rate hikes. Many shippers believe these disruptions have allowed shipping lines to inflate their profits, compounding the difficulties for cargo owners.
Despite last year’s challenges, including the Middle East war and the subsequent closure of the Suez Canal, shipper confidence is starting to grow. Newbuilding capacity, initially expected to rebalance supply and demand, was absorbed as carriers rerouted around the Cape of Good Hope. Now, with fresh insights from GSF’s latest data-driven tools, shippers can enter negotiations with better market visibility.
Bringing Clarity to the Chaos
Historically, shippers have entered contract negotiations with minimal visibility into market trends, often relying on speculation. To tackle this, GSF and MDS Transmodal have designed a quarterly market report to give shippers a clearer view of what’s happening in the industry. Hookham explained, “The market is too unpredictable at the moment to confidently make projections, but we can look at trends under current circumstances.”
The quarterly reports will be compiled using publicly available data and MDS Transmodal’s algorithms to track these trends and inform shippers. These reports will be a vital tool for shippers seeking three key pieces of information: data to use in negotiations with shipping lines, a deeper understanding of trade routes, and a framework for evaluating re-sourcing decisions, especially for markets in Asia and closer to consumer bases.
Container Shipping Performance Indicators (CSPI): A New Benchmark
As part of this data initiative, GSF and MDS Transmodal have introduced the Container Shipping Performance Indicators (CSPI). This tool includes eight indices, covering crucial metrics such as capacity, profitability, and connectivity. Three of these, which Hookham will present at the congress in Panama, are designed to address the pressing concerns of shippers as they gear up for contract negotiations.
The CSPI will provide insights into specific regions, trade routes, and ports. But for Hookham, the core question remains: “How much of the deployed capacity is actually available for booking?” Hookham points out that the number of bookable slots is a fraction of the reported capacity, as various factors such as ship speed, port calls, and blanked sailings affect the actual availability.
Developed during the Covid pandemic, the CSPI has now matured into a sophisticated tool that shippers can use to navigate the complexities of global shipping. Shippers will benefit from capacity and utilisation data, which has already influenced major regulatory decisions. Analyst Antonella Teodoro of MDS Transmodal noted that the CSPI data was instrumental in pushing the European Commission to end the carriers’ block exemption from competition rules.
Current Market Trends and Future Challenges
MDS Transmodal’s analysis indicates that there is currently spare capacity on the headhaul routes of the three major trade lanes, with utilisation on the Pacific at 70%, Asia to Europe at 80%, and the westbound Atlantic at 65%. However, Teodoro predicts that by February 2025, there will be a significant surplus of capacity as newbuilds come online.
While the anticipated disruption from a potential US East Coast port strike may cause some challenges, Teodoro does not expect it to reach the same levels of chaos seen during the pandemic.
Global standing capacity is projected to increase by 1.7 million twenty-foot equivalent units (TEU) by early next year, from 29.9 million TEU to 31.6 million TEU. Though some of this will be offset by scrapping older vessels, the majority of newbuilds are large ships exceeding 15,000 TEU.
Reflecting on the stark difference between the current market and the crisis years of 2020, Teodoro pointed out: “In 2020, there were virtually no vessels available, and utilisation was over 90%. This is a major difference between then and today’s market.” That scarcity in 2020 sent freight rates soaring, but the current trend suggests a looming surplus that could drive rates down.
Looking Ahead: What to Expect for 2025 Contract Negotiations
With a major drop in spot rates expected by Q4 of 2024, many in the industry are anticipating that this could have a significant impact on upcoming contract negotiations, especially in the Asia to Europe trade lanes. If the market softens as predicted, we may see a ripple effect across other major routes, including the Pacific.
As the shipping industry braces for another round of contract talks, shippers are better equipped than ever to make informed decisions, thanks to tools like the CSPI. Armed with data, they are poised to negotiate from a position of strength, reducing their vulnerability to market fluctuations.
“The market is too unpredictable at the moment to confidently make projections, but we can look at trends under current circumstances.” — James Hookham, GSF Director
Prepare for the 2025 contract negotiations by leveraging the latest insights from GSF and MDS Transmodal. Don’t be left in the dark—get access to the CSPI reports and arm yourself with the data you need to stay ahead in a volatile market. Contact GSF today for more information.
