Premium container service uptake pulls industry away from commoditization

October 21, 2020

Amid the current market of record-high container freight rates and widespread equipment shortages, which are likely temporary despite the pain inflicted on shippers, there are signs of a longer-term change in the market where more shippers are gaining an appetite for premium services, pushing the industry away from commoditization and toward value creation.

There is a difference between surcharges linked to real-time market conditions, the somewhat longer horizon of contract pricing terms, and actual underlying changes in how business is changing that would represent potentially permanent change in the market. Despite all the noise around the current lofty spot rate market, more subtle, but important, changes are sneaking into the market that provide guidance on where things may be headed in coming years.

Premium services are a good place to start. In the decade that has followed the financial crisis, which was characterized by overcapacity, commodity pricing, and lack of service differentiation, carriers’ efforts to introduce value-creating services were, for the most part, non-starters. One example was Daily Maersk, launched in 2011 and suspended in 2015, under which the world’s largest carrier sought to create a conveyor belt of daily sailings out of China with a premise of guaranteed delivery times for which it sought to extract a premium rate. In the environment of that time, that wasn’t possible.

To Read More: https://www.joc.com/maritime-news/container-lines/premium-container-service-uptake-pulls-industry-away-commoditization_20201019.html?page=1

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