With air cargo demand stabilizing and capacity up, shippers are reevaluating contracts as air freight rates drop, industry executives say.
Following COVID-19’s capacity-strapped market which put air carriers in the driver’s seat, shippers are now in a position to negotiate their rates, Hellmann Worldwide Logistics Airfreight COO Jan Kleine-Lasthues told Supply Chain Dive in an interview.
“I believe we will see more and more RFQs coming out and shippers [trying] to secure the low rate level which we have at the moment for a longer period,” Kleine-Lasthues said. He anticipated possible contract agreements of six to 12 months.
Kleine-Lasthues noted that certain industries such like automotive and pharmaceuticals are especially looking for longer-term agreements right now, and he expects to see “more RFQs coming in the coming weeks.”
As customer contracts based on prior period rate levels expire, Geodis is also advising shippers to revert to long-term pricing agreements with a fluctuating fuel charge, EVP of Freight Forwarding Eric Martin-Neuville told Supply Chain Dive.
“There are limited risks in terms of access to capacity and thus the time is right for shippers to work on reinforcing the robustness and resiliency of their supply chain,” he said.
Xeneta’s Clive Data Services reported in June that freight forwarders, still feeling “handcuffed” by high airfreight rates and blocked space agreements with airlines, saw more shippers push to relaunch tenders and negotiate lower rates. During Q2, Clive saw six-month or longer contracts “gaining more ground.”
Amid shifting market conditions, shippers should remain focused on long-term relationships with carriers as capacity on certain trade routes may be vital in the near-term, said Peter Penseel, COO of air freight at CEVA Logistics. Over the past several years, volatility in the air freight market “placed a premium on relationships” when considering capacity, demand and freight rates.
“As markets swing back and forth, all sides at the table need to remain focused on the long-term partnership, prioritizing long-term stability and trust over short-term gains,” he said.