Shippers got burnt over the last two years. Some escaped with only minor heat rashes while others were scarred with third-degree burns.

No matter the extent of how disrupted their supply chains became, there’s no denying there weren’t at least several blunders along the way in each and every one of them.

And, while some of these were on shippers for not being prepared for a volatile Covid-era market, the shipping lines (carriers) could’ve made things a little easier for them.

A balance of power

A lot of our talk as of late has been about the shift of power between the shipper and the carrier. What do we mean by this? Who had the power before?

Since the closing months of last year, shippers have been in control of this power dynamic. We’ve seen carriers try to win back some of this leverage through common tactics, like blank sailings or reallocating vessels to other trades, but ultimately shippers have been running the show.

Clearly, it wasn’t always like this. In fact, at one-point last year, frustrated shippers probably thought things would never fall in their favor again.

Market conditions were completely mirrored. Carriers were calling the shots, demand was insatiable, rates were unfathomably high, and finding space was like trying to fit an eight-foot pool table in a studio apartment.

These conditions were unprecedented. And, while that alone is enough to drive chaos in the market, these conditions also slammed the market swiftly.

Volatility came quickly. No one, and to be fair, including carriers, had the foresight to see the invisible.

Last year’s contract chokeholds coming back to bite

However, it’s not the circumstance we look back on. It’s how everyone that was involved reacted to the circumstances.

Carriers saw this as a lucrative opportunity. There’s no shame in that revelation, but at what point did they cross the line?

Well, the answer depends on the shipper you ask. As we said at the top, everyone was burned but at different severities.

The shippers who are caked in Neosporin ointment from all of their burns are not letting bygones be bygones with past woes.

A tidal wave of shipper complaints directed at carriers has swamped the Federal Maritime Commission (FMC).

The brunt of the complaints has to do with carriers failing to provide contracted space on vessels and forcing shippers (under contract!) to pay higher rates on the spot market instead. If not, the cargo would be rolled.

At its worst, some shippers have even said they paid spot rates for space on the very same ship they contracted.

That’s like a gym member running on a treadmill at Planet Fitness, only for an employee to kick them off that same treadmill and say run on another one. Also, they’re paying twice as much to work out that day.

This doesn’t look good on the part of carriers. These grueling anecdotes from shippers suggest carriers were deliberately backing out of their contracted arrangements to favor profit.

At this time, we aren’t officially accusing them of this. We’ll have to see what formal investigations uncover. That said, however, this certainly calls into question the practices carriers conduct with their services and, when given the upper hand, how they wield their power.

Shippers are eyeing future risk, not best-bargain revenge

So, why haven’t shippers tried to “get back” at the carriers now that they control the buyer-seller dance? Couldn’t they haggle the desperate shipping lines to the lowest buck?

Cue one of our insights from February–the cautiously optimistic shipper.

While shippers should feel empowered with a degree of buying power over carriers, driving the best bargain they can get when negotiating a contract may not be the best approach.

Surely, it’d be cathartic after a rough two years, but shippers have shown to be more calculated than that. Many have identified future risk, an awareness of how fickle the industry can be. Consider this a Covid legacy.

These future risks could mean a lot of things, but what most shippers anticipate are carriers locking up contracted space down the road for when demand picks up again.

As a result, a popular strategy this contract season has been flexibility.

Contracts are still being inked, but for less volumes and with multiple carriers or forwarders. In return, shippers are designating their remaining freight to the spot, or open, market. With some even going as far as committing half their freight to floating market conditions down the road.

We are now nearing June and the market has stayed relatively soft. Are shippers overreacting? Are they being too weary?

Of course, not. The first half of the year is on the homestretch of being muted and uneventful, but these proactive decisions from shippers are certainly worth any extra time or costs they invested.

The reality is we likely won’t see a Covid-era freight surge that persuaded carriers to lock out contracted space, but it’s happened before.

If there’s precedent, even for the crazy, best believe there’s a chance it could happen again. Even if it’s at weaker intensity, the same issues could emerge for shippers.  

And, now for our next section, we’ll talk about the benefits of purchasing asteroid insurance for your home.

Jokes aside, adding assurances to the tab, whether on the open or contracted market, is a strategy we strongly recommend. Want to discuss this with one of our experts? Contact us!