Maersk Joins the NYSHEX Platform
Maersk Line has joined Hapag Lloyd, CMA CGM, MOL, OOCL and COSCO on the New York Shipping Exchange (NYSHEX), a digital platform that promises shippers a new form of freight contract. In March, Maersk Line will roll out bookings on NYSHEX, starting with agricultural exports from the U.S. to Asia.
"Maersk Line has been a pioneer of many digital initiatives, and we are delighted to be working together in digitizing the freight contracting process, as well as improving shipment reliability,” said Gordon Downes, CEO of NYSHEX.
NYSHEX has attracted six of the top 10 ocean carriers, and it's also gaining traction outside of shipping. Gold-plated institutional investors Goldman Sachs and GE Ventures were early supporters, and the Federal Maritime Commission has approved the firm's governance model.
On the NYSHEX platform, carriers offer non-negotiable, published freight rates that they cannot change later with surcharges or GRIs. For paying the full market rate, the shipper gets an enforceable contract for guaranteed service. The contract can be specified up to six months out, and it comes with a guarantee that the container will end up on the boat on time, not like traditional contracts, where the box may get rolled over onto the next sailing. In return, the carrier gets a fully enforceable commitment from the shipper for container volume. Both parties put down a deposit with NYSHEX at the time the contract is booked, and penalties for failing to provide or load the container are deducted from the deposit amount. Shippers and carriers can both resell their contracts if needed in order to avoid penalties.
NYSHEX says that this new contract form has the potential to solve some of the industry's most serious problems. The firm lays out the challenge as a cascade of inefficiencies: At present, carriers have to minimize the cost of their service in order to stay competitive. This lowers service levels, and in response, shippers double book their boxes in order to ensure that their goods get to market. Since they double book, they have to cancel unused bookings, leading carriers to overbook their ships in order to ensure that enough containers show up at the pier. When too many containers show up at an overbooked ship, carriers have to roll over some containers to the next sailing - particularly containers booked with spot contracts - giving shippers an incentive to double book their next cargo.
The NYSHEX Forward contract is different, the exchange says. For shippers, it allows a reduction in risk: They get a guaranteed loading week and a guaranteed price. For carriers, NYSHEX contracts are a source of reliable volumes that can be used to plan service networks, and carriers can price underbooked sailings at a lower rate to attract more volume. Contract disputes over surcharges are gone, as the price is all-inclusive, and the up-front deposit system makes collection straightforward.
Maersk's announcement with NYSHEX follows one year after it launched a freight booking partnership with Alibaba, the world's largest retailer. Chinese exporters selling goods on Alibaba can use its OneTouch shipping site to book space directly on Maersk's vessels, without a freight forwarder.