No general time frame suits everyone, but sellers trading with a buyer in a new country should benchmark prices before finalising the sales contract, says Xeneta’s Katherine Barrios
Knowing when the best time to negotiate freight rates is depends on who you are as an entity and what is most suitable for you, for your business and for your supply chain. No general time frame suits everyone for the negotiation of ocean freight rates.
For example, if you are a seller trading with a buyer in a new country, then the best time for you to benchmark and negotiate ocean freight rates is before you finalize the trade deal or the sales contract. This would be important as the ocean freight rates, and the associated charges that you negotiate can influence the shipping terms (Incoterms) you agree with your trading partner. CIF, CFR, CPT, CIP. This may apply even if you are selling to a new customer with higher volumes in a country that you are already trading in.
If you are an OTI (Freight Forwarder or NVOCC) for example, you may need a fixed, long-term ocean freight negotiation schedule to utilize your volumes and secure a good FAK rate (Freight All Kinds).
If you are a BCO (Beneficial Cargo Owner) who has fixed volumes that require longer validity of say 12-18 months, you may choose to negotiate ocean freight rates based on a tender. You may float this tender in line with your financial year which may be the middle of the year or end of the year. Besides, it is worth considering launching a bid outside the peak shipping season. Lower shipping demand might prompt carriers to offer and commit to better deals.
If you are a BCO that deals with seasonal cargo such as tobacco, cotton, fruits, wool, etc. you will need to negotiate your rates well in advance of the next season. While negotiating ocean freight rates in this space, you may need to consider how the season has been and how the commodity is expected to sell for the next season.
Irrespective of who you are as an entity and the business you are in, if you are involved in ocean freight rate negotiations, you always can use freight benchmarking tools to choose the right time to negotiate the ocean freight rate based on historical, present and future contract-rate data, global trends on trade, capacity development and shipping agreements of your peers.
*Katherine Barrios is chief marketing officer at ocean freight rates benchmarking specialist Xeneta