Commentary

By John McCauley

For carriers, market volatility is no longer viewed as a crisis.

I recall attending conferences during the first two decades of this century where the consistent cry( mainly, but not exclusively) from carriers was the endemic volatility in container freight markets and the resultant inability of carriers to make sustainable profits. Volatility occurred due to a number of factors:

Commoditization saw carriers’ offerings become undifferentiated for the same processes and service, specifically( poor) reliability, booking, container type( only different colors), transits, etc.

A significant number of incumbents came into the market at all levels, often with relatively small players able to secure space on the same vessel as medium to large players.

All players instituted poor pricing policies, inevitably setting market floor prices closest to the bottom feeders( all carriers were guilty). This applied to both contract and spot pricing.

Carriers lacked price transparency and the speed to react and adjust.

They continued using an antiquated contracting process because“ it was always done that way.”

Demand was highly fragmented but paradoxically largely constant and consistent at a macro level. The largest beneficial cargo owner( BCO) was less than 1 % of total trade, while the largest non-vessel-operating common carrier( NVO) controlled 2.5 % of total trade.

And carriers were committed to providing a service to enable trade, sometimes at the expense of profits.

So, what changed? Basically everything, but mostly on the supply side.

The most significant change was the market concentration of participants. Ocean Network Express was created, Hanjin went bankrupt, United Arab Shipping Company( UASC) was bought by Hapag-Lloyd, and many small players came in and out of the market. Large players also mopped up and / or scrapped a good portion of old and inefficient tonnage.

Coupled with this was a shift in thinking by carriers from providing a service to driving profitability. This showed in many ways; carriers realized customers would not pay a premium for reliability, so reliability became obsolete as a market factor.

Furthermore, carriers became adept at withdrawing supply rather than sticking rigidly to a schedule. This was an acknowledgement of the inherent risks of reliability: weather, port congestion, disputes ashore and inland, etc., in addition to macro risks such as COVID-19 and the Red Sea crisis.

Finally, carriers became extremely skilled at managing pricing for contracts and the spot market. For contracts, they have been able to limit the overbooking of volume, making customers pay spot if they are above quota on a vessel, weekly or monthly level.

The upshot is that volatility is heavily one-sided in the carriers’ favor. For them, market volatility is no longer viewed as a crisis.

This was confirmed in a recent briefing by Maersk CEO Vincent Clerc, who said container pricing has changed permanently since the pandemic and that there is now a natural floor under the price. Analyst Lars Jensen has also argued for months that the Cape of Good Hope rerouting created a structural floor under ocean rates.

Clerc also said carriers can earn considerably more than the pre-pandemic market allowed and highlighted that modern container freight pricing is highly agile and volatile.

Carriers are expanding their fleets significantly. The Suez Canal seems to be reopening, new efforts are being made to bring larger vessels into the East Coast of the US, and demand on the back of AI expansion will surely plateau or decline.

What does this mean for BCOs considering their strategy and objectives for contracting in 2027, particularly on the trans-Pacific?

What is likely is carriers will be less inclined to partake in endless rounds of negotiations as in the past.

The search by most BCOs for indications of market price levels from major BCO negotiations will prove fruitless and potentially misleading.

Expect surcharges to appear regularly throughout the year for any justifiable or spurious reason. BCOs should try to keep them out of contracts. Aim for some portion of spot volume; it will pay off, although it does require close monitoring.

Finally, BCOs need to recognize the old days of relationships and negotiations are largely over. Pricing is centrally controlled, those sitting opposite the BCOs have little room to maneuver, and time and size are on their side. It’ s time for BCOs to learn new ways of managing their container shipping risk.

email: john-mccauley1 @ outlook. com

54 Journal of Commerce | November 2, 2026 www. joc. com