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Xeneta supports clients in building index-linked agreements in ocean container shipping that are built to last - not only by providing index data, but also through our industry experience, market intelligence and solutions.
This means we understand some of the pitfalls clients encounter when linking contracts to a non-Xeneta index – with geography and a lack of regional and port-level data being one such example.
Your index needs to represent your trade lanes and supply chain geography
It is fundamental to a successful agreement that the index you link your contract to represents the geography of trades you ship on.
When we talk to clients who have experienced difficulties in the past with non-Xeneta index-linked contracts, we find they are shipping containers on one trade but basing the price they pay on a trade thousands of miles away, sometimes on another continent.
For example, if you are shipping from India to Europe, an index linked to Shanghai export trades is not adequate.
Exporting from Singapore? That’s 4,000km from Shanghai. Mumbai? That’s 4,000 nautical miles from Shanghai. How about Durban? That would be more than a quarter of the world’s circumference away.
And yet, I have spoken to businesses who shipped on these trades but used a non-Xeneta index based on Shanghai export markets. Unsurprisingly these contracts failed – hence why they came to Xeneta for support.
Unless you have access to Xeneta data, which includes more than 170,000 port-to-port pairs across the world’s trading regions, then perhaps you felt you had no option but to index against the next best fit. However, this is not a compromise you should take or need to take.
Why is Xeneta data granularity important in index-linked contracts?
Prices will naturally diverge across trades and geographies, whether that is due to demand shocks, geopolitics, weather, labor strikes, emissions regulations or port congestion, to name just a few.
As soon as prices diverge, there will be a winner and a loser in the index-linked contract and an incentive for either the buyer or seller to break it.
Let’s say you are shipping from India to Europe but basing it on a Shanghai index that spikes due to a geopolitical incident predominantly impacting China export trades. Well, ships out of China might be full and the index might easily climb by USD 1 000 per FEU.
The shipper may then go and ask a freight forwarder for a rate on the India to Europe trade – the one they are actually moving containers on and where there is more available capacity. The shipper may well get a price much lower than what the carrier was quoting based on the Shanghai export index.
The inverse can also be true and prices out of India might climb while the ones out of China stay flat, in which case the carrier has the incentive to break the deal.
Importance of geography explained in numbers
The below sets out the implications of tying volumes exported from Japan to Los Angeles against an index linked to Shanghai export freight rates.
1 April 2025
- Japan to Los Angeles average spot rate: USD 3 307 per FEU
- Shanghai to Los Angeles average spot rate: USD 2 843 per FEU
- USD 464 per FEU more expensive shipping from Japan.
1 January 2026
- Japan to Los Angeles average spot rate: USD 2 599 per FEU.
- Shanghai to Los Angeles average spot rate: 2 797 per FEU.
- USD 198 per FEU more expensive shipping from Shanghai.
If you tied yourself to a Shanghai index on 1 April 2025 with a base price of USD 2 843 per FEU, the rate was almost flat on 1 January 2026 at just under USD 2 800 per FEU (albeit with significant volatility during that time).
In practice, the buyer has left almost USD 200 per container on the table if they are shipping from Japan to Los Angeles on 1 January based on the Shanghai index (and much more if they accepted an additional USD 400 Japan surcharge, as many customers did).
This cost soon mounts up. Shipping 1,000 containers means you are leaving USD 200 000 on the table against 1 January rates.
This level of fluctuation is not uncommon. In fact, over the past three years, shipping from Japan has been anywhere between USD 600 cheaper and 700 USD more expensive per FEU compared to shipping from China.
Advice to shippers
Make sure you choose an index that represents your supply chain geography correctly. If you ship from Japan, do not choose an index based on Chinese ports. If you have more complex or exotic trades, make sure your index provider has the granularity of data to cover them well enough.
You need someone to support you in building a strong index-linked contract that is fair to both the buyer and seller.
Xeneta has an index-linked contract simulator that allows our customers to understand the benefits of adopting this new way of procuring freight and ensure it adequately reflects their supply chain set-up and geography.
This is a controlled way to understand the benefits of index-linked contracts so you can move forward to a new way of procuring freight with confidence that the index you are basing your rates on is the right one for you.
Learn more about how Xeneta supports our customers with index-linked contracts by downloading a free guide here.
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