The Covid-19 pandemic is sending ripple effects across virtually every facet of the shipping world. We hosted a March 12 webinar to help our clients make sense of the rattled market, which is facing “unprecedented uncertainty,” according to our CEO and co-founder Patrik Berglund. Though the future may be currently a bit murky, Patrik offered some helpful takeaways to guide professionals as they move forward:
Create Contract Flexibility
Our data shows there’s a growing delta between shipping rates in the short-term and long-term markets.
Cargo in the short-term market is fetching a significantly higher rate, so naturally carriers are prioritizing it over cargo in the long-term market.
“This is one of the main reasons to stay on top of the market,” Patrik explained. “Because at some point, the cost of those boxes not being moved is going to far outweigh the cost of the container rate.”
With so much uncertainty in the market, Patrik recommends finding ways to create flexibility in your long-term contracts.
For example, if you have a 12-month or 24-month supplier contract, make sure your rate validity period is quarterly. That way, you can adjust your rates with the market as needed.
Improve your Contingency Plan
Patrik said the current situation is an opportunity to build a contingency plan with a more global focus.
“It’s not really an alternative to have two Chinese suppliers or one in Vietnam,” he explained.
A wiser approach is to look at different continents and near shoring--and determine how that can help you avoid future disruptions.
“This is where our data sets can be of true value,” he said. “They help you simulate some of those supply chain costs as you find alternative suppliers in South America, Europe, Africa, or North America.”
He also pointed out that many clients are exploring moving their cargo to Europe and Asia with a combination of air and ocean transportation.
Monitoring the market has never mattered more.
“You would never make a blind bet,” Patrik pointed out during the webinar. Yet making a critical decision without market data is largely that. Especially at time when so much is up in the air.
“You need the ability to closely monitor the market so you can see what sort of risk you’re exposed to,” Patrik said. “And you need to be able to understand what sort of cost picture are you facing going forward as the market recovers.”
Xeneta’s dynamic data provides that clear picture in real-time, and can even allow for forecasting.