How can you negotiate container shipping rates?
Container shipping rates are one of the most significant costs for businesses that rely on international trade. However, they are not fixed and can vary depending on various factors, such as demand, supply, seasonality, fuel prices, and port congestion. Therefore, it is possible to negotiate better rates with your shipping partners if you follow some effective strategies. In this article, we will share some tips on how to negotiate container shipping rates and save money on your transportation management.
Before you start negotiating, you need to have a clear idea of your shipping needs and requirements. This includes the volume, weight, dimensions, and type of cargo you want to ship, the origin and destination ports, the transit time, and the service level you expect. Knowing your shipping needs will help you compare different quotes from different carriers and identify the best options for your business. It will also help you avoid paying for unnecessary services or fees that you don't need.
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Carriers want reliability. If your volumes are consistent, every week on the same lanes, carriers don't need to worry about selling as much space on the open market and will offer better pricing. You may hedge your pricing and be middle of the market all year, but it will be more worth it when peak season hits and other shippers are scrambling for space
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Container shipping rate negotiations demand a strategic approach. Start by assessing your shipping requirements and market conditions. Open, transparent communication is valued by carriers; sharing your volume commitments and understanding their cost structure is crucial. Negotiating isn't solely about cost reduction; it's about fostering a long-term partnership. Embrace flexibility – consider non-traditional routes and carriers. Consistency and reliability are highly regarded. Stay agile, monitor market dynamics, and revisit negotiations when conditions shift. Cultivate a mutually beneficial relationship for competitive rates and dependable service.
Another important step is to research the market rates for container shipping and understand the factors that influence them. You can use online platforms, such as Freightos or Xeneta, to get an overview of the current rates and trends for different routes and regions. You can also consult with freight forwarders, brokers, or industry associations to get more insights and data. Researching the market rates will help you set realistic expectations and goals for your negotiations and avoid overpaying or underbidding.
One of the best ways to negotiate better rates is to build long-term relationships with your shipping partners, such as carriers, freight forwarders, or agents. By establishing trust and loyalty, you can benefit from preferential rates, discounts, or incentives that are not available to one-time or occasional shippers. You can also leverage your volume and frequency of shipments to negotiate lower rates or fixed contracts that protect you from market fluctuations. Additionally, you can improve your communication and collaboration with your partners and resolve any issues or disputes more easily.
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I always prefer to book my contracts through a forwarder. Unless you are Walmart or Target, most companies are not going to have the negotiation volumes needed to get the best pricing. Plus, working through a forwarder allows you flexibility of multiple carriers on the same lane rather than relying on the schedules and availability of only one carrier.
Another effective strategy is to be flexible and adaptable to the changing market conditions and opportunities. This means that you should not limit yourself to one carrier or route, but explore alternative options that may offer lower rates or faster transit times. You should also be ready to adjust your shipping schedule or mode according to the demand and supply situation, the seasonality, or the external events that may affect the shipping industry. For example, you may opt for air freight instead of sea freight during peak seasons or emergencies, or vice versa.
Finally, you should not be afraid to ask for discounts and extras when negotiating container shipping rates. You may be surprised by how much you can save by simply asking for a lower rate or a waiver of some fees or charges. You can also ask for extra services or benefits, such as free storage, insurance, tracking, or documentation. However, you should always be respectful and reasonable when asking for discounts and extras, and avoid making unrealistic or unreasonable demands that may jeopardize your relationship with your partners.
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Look at current debt of the steamship lines you are using. Too much debt is a risk of bankruptcy, like when Hanjin went bankrupt, there were 10s of thousands of containers that were essentially stranded for a few months while the creditors held liens on the vessels. Lower prices can come with added risk if the carrier is trying to load up space at bargain pricing.
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