Maersk Line confi rmed at the presentation of its 2021 annual results that it is focused on building long-term relationships with shippers. In these relationships, Maersk provides integrated logistics services including long-term agreements on freight rates. The best indicator for the success of this strategy is the share of freight covered by short-term contracts. In 2017, this was 52 per cent, compared to 35 per cent in 2021. The goal for 2022 is to reduce this share even further to 25 to 30 per cent.
Maersk has the wind at its back for implementing this strategy: given tight capacity, shippers are eager to secure their shipments. Thus, Maersk can afford to upset the forwarders, as it has reportedly done in various countries through to the end of 2021, even though these entities can bring in large volumes. Forwarders can use the ‘open for all’ spot booking platform, but that implies their rates will be unfavorable compared to rates directly negotiated with Maersk as part of long-term agreements.
On top of this, forwarders face competition from some large digital freight forwarders, like Flexport, recently valued at US$8 billion and with fresh cash to spend (that certainly is a lot in the fragmented forwarding industry – but suddenly looks like small money when compared with Maersk’s 2021 free cash flow of US$ 16.5 billion).
Overall, the diminished attention of Maersk (and other lines) paid to forwarders, as well as digitalisation of forwarding, driven by new entrants implies forwarders become less important players in ‘port selection’. Even when forwarders decide how freight flows are handled, that will generally be done based on algorithms instead of by commercially savvy forwarders looking for the best deal. While all of this has been coming for years, the capacity crunch in liner shipping is accelerating the process. An open question is whether there will be an impact on ports. Rotterdam traditionally was known as a ‘shipping line port’ and Antwerp as a ‘forwarders port’ (in part because of the comparatively low terminal handling charges). Perhaps both of them will have to get used to being an ‘algorithm port’.
