The year 2024 brought significant challenges for non-vessel-operating common carriers (NVOs), as ocean carriers tightened contract terms and placed greater emphasis on spot cargo. These changes have introduced new complexities for NVOs and their customers, reshaping how contracts are negotiated and fulfilled.
Tightening Control Over NVO Contracts
This year, ocean carriers implemented stricter measures in their dealings with NVOs. Contracts previously reserved for large-volume shippers became increasingly difficult to secure, as carriers focused on maximizing profitability. These shifts left many NVOs struggling to balance customer needs with carrier demands.
For cargo owners, this created uncertainty regarding access to vessel space. Contract clauses allowing NVOs to bypass obligations if space couldn’t be secured further complicated the landscape, prompting concerns about long-term reliability.
What Lies Ahead in 2025?
The challenges of 2024 were largely shaped by unique market conditions, including early peak seasons and disruptions in key shipping routes. While some anticipate a market softening in 2025 due to increased capacity, others expect carriers to maintain their advantage by deploying strategies to manage overcapacity, such as slower sailing speeds and reducing active fleet size.
The Changing Balance Between Spot and Contract Rates
A notable trend has been carriers’ push for a larger share of spot cargo, often at the expense of named account rates (NAC) traditionally offered to NVO customers. Early in 2024, carriers demanded significantly more spot cargo bookings, with some requiring up to five times as much spot cargo as contract cargo. However, more recent negotiations suggest a return to a more balanced ratio, signaling potential relief for NVOs.
The increase in global shipping capacity, with new vessels entering the market, is expected to play a role in shaping carrier strategies. As capacity grows, competition among carriers may lead to more favorable terms for NVOs.
Enhanced Monitoring of Contract Adherence
Despite potential market softening, carriers are unlikely to ease their scrutiny of how NVOs fulfill their contracts. Advances in monitoring technology allow carriers to closely track whether NVOs meet agreed-upon volumes and ensure named account cargo aligns with contract terms. Non-compliance is met with swift action, disrupting previous practices where contract rates were occasionally used for multiple shippers.
This heightened oversight is expected to remain a standard practice, even in a less favorable market for carriers, as they seek to maintain tighter control over contract fulfillment.
Opportunities in an Evolving Landscape
While 2024 presented challenges, the coming year may offer opportunities for NVOs as market dynamics shift. Increased vessel capacity and growing competition could lead carriers to adopt more flexible terms to secure cargo and maintain utilization. For NVOs, the ability to adapt to these changes while maintaining compliance with carrier requirements will be key to success.
Streamlining Your Global Shipping Strategy
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