When individual trade lanes move according to different market forces, procurement is no longer choosing simply between “lock the rate” and “buy spot”. The real decision is how much stability to buy, and what price to pay for that stability.
Spot or long-term: There is no single right answer
Spot rates are attractive when the market is falling because shippers can quickly capture lower prices instead of remaining locked into a contract above market. But spot exposure becomes painful when demand rebounds, carriers blank sailings or a geopolitical shock removes capacity. At that point, rates can move within days and access to space may become more important than the freight price itself.
Long-term contracts do the opposite. Shippers commit volume, validity and commercial terms in exchange for more predictable budgets, allocation and operating relationships. For supply chains with fixed production schedules, high-value cargo or significant costs from missed departures, the value of the contract lies in continuity rather than only the number shown on the freight invoice.
Yet a long-term rate is not perfect insurance. When the contract price moves too far away from the market, compliance incentives weaken on both sides. If spot falls sharply, shippers may move cargo outside the contract or seek renegotiation. If spot rises dramatically, carriers may become less willing to allocate scarce capacity to an unattractive rate unless service commitments and enforcement mechanisms are clearly defined.
The market in mid-September 2026 illustrates the problem. Drewry reported Shanghai-Los Angeles at USD 7,712 per 40ft and Shanghai-New York at USD 10,394, while Shanghai-Genoa fell to USD 4,016 and Shanghai-Rotterdam to USD 3,626. In the same week, Transpacific rates were supported by pre-Golden Week demand and blank sailings, while Asia-Europe rates faced weaker demand and the gradual restoration of Suez services.
That is why many large shippers do not make a binary choice between spot and contract. They build a portfolio: one share under long-term contracts to protect capacity, one share kept flexible for spot or short-term buying, and another share under adjustable pricing mechanisms. The mix depends on lane volatility, forecast confidence and the cost of freight not moving as planned.
Index-linked contracts: Anchoring freight rates to the market
Index-linked contracts offer a middle ground between a fixed annual rate and full spot exposure. Instead of agreeing one price for the entire validity period, the parties choose an independent market index, an adjustment formula and a review frequency. The contract rate can then move with the market within agreed parameters.
Drewry describes the World Container Index as a widely used reference for index-linked contracts, while Xeneta builds benchmarks from actual rates paid by shippers and freight forwarders across a large number of port pairs. The principle is the same: bring an external market reference into the contract so that adjustments depend less on subjective negotiation.
A well-designed index-linked agreement must answer several questions. Which index should be used? Does it closely match the trade lane and equipment type? Will the rate reset weekly, monthly or quarterly? Will the full index movement be passed through or only a percentage? How will BAF, EU ETS, peak-season, congestion or Red Sea surcharges be treated? A poor benchmark creates basis risk: the index moves one way while the shipper's actual lane costs move another.
The parties can also use caps, floors or collars to limit extreme movements. A rate may follow the benchmark but only within a defined quarterly range. This can protect carriers from uneconomic pricing in a collapsing market and protect shippers from sudden budget shocks when spot rates spike.
Indexation can also reduce repeated renegotiations. In volatile markets, fixed-price contracts are frequently reopened, consuming procurement time and straining commercial relationships. A transparent formula makes it clear in advance when the rate changes and according to which rule.
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Before locking an ocean freight contract, procurement should test four variables: confidence in forecast volumes; volatility and capacity risk on each lane; the value of service commitments such as allocation, free time and reliability; and the adjustment mechanism, including the chosen index, surcharges, caps, floors and review triggers. The lowest freight rate matters only if the container actually sails and the total cost of rollovers, delays or emergency spot purchases does not erase the initial saving. |
Should procurement buy the lowest rate or buy stability?
The answer depends on the total cost of freight disruption. A retailer with sufficient inventory may tolerate a few days of delay. A lean electronics plant may lose far more if one container of critical components misses production. Procurement therefore needs to quantify the value of reliability rather than compare rate sheets in isolation.
That also means freight contracts must extend beyond the base ocean rate. Minimum quantity commitments, allocation, rollovers, no-shows, free time, demurrage and detention, routing flexibility and service-performance reporting should be designed together. A higher rate with reliable allocation and fewer rollovers may produce a lower total landed cost.
Market data should be used throughout the contract lifecycle, not only during tender season. Spot and long-term benchmarks, capacity outlooks, blank sailings, port congestion and bunker surcharges can become review signals. Continuous monitoring helps companies avoid two costly extremes: remaining over-contracted in a falling market or under-protected before a rising one.
For Vietnamese shippers, a practical approach is to segment lanes instead of applying one global procurement policy. High-volume, stable and strategically important routes may justify long-term or hybrid contracts. New routes, lower-volume flows or highly uncertain corridors can retain more spot exposure. On volatile lanes, index-linked contracts deserve consideration when the company has sufficient data and contract-management capability.
Counterparty quality matters as well. A contract is valuable only if both parties continue to honor it when market conditions move against their short-term interests. Carrier selection should therefore include allocation performance, schedule reliability, exception handling and data transparency, not only the quoted freight rate.
Freight volatility cannot be eliminated from ocean shipping because it reflects changing demand, vessel capacity, geopolitics and disruption across global networks. What companies can control is whether volatility arrives as an unmanaged surprise or as a risk already structured into the contract.
A good freight contract is therefore not necessarily the cheapest one. It is the one that makes clear what the shipper is buying: price, capacity, reliability and a mechanism for sharing market movements. When procurement treats the freight contract as a risk-management instrument, the most important question is no longer “What is today's rate?” but “Will the supply chain remain resilient if tomorrow's rate moves the other way?”
