The New York Shipping Exchange has changed its business strategy in response to significant changes in the way customers contract for container transportation.
Instead of focusing primarily on drafting contracts, the OTC exchange is now increasingly working on improving contract fulfillment and thus contract settlement, said Gordon Downes, CEO of NYSHEX.
“We are much more focused on concluding a contract than on creating one,” he said.
NYSHEX has also changed prices and is targeting its first consistent operating profit by March 2025, Downes said in an interview last week. NYSHEX began operations in 2015.
NYSHEX shippers will now, for the first time, pay a modest fee of $5 for each TEU (20-foot container) covered by a swap agreement. Last year, NYSHEX arranged the transport of around 3.2 million containers.
Shipping companies participating in the exchange – including CMA CGM, Hapag Lloyd, Maersk and Mediterranean Shipping Co. – will continue to pay an annual fee of $1.5 million for contract coverage through NYSHEX.
NYSHEX “two-way obligation” contracts are unique because they impose a penalty on a defaulting party. The shipper/beneficiary of the cargo/non-vessel operator or carrier who fails to meet the contract terms pays a rebate to its injured counterparty.
The strategic realignment of the ten-year-old company NYSHEX aims to improve successful contract execution after Covid and reduce numerous disputes.
A major problem for shipping companies is ship scheduling failures due to “black swan” events. Recently, this has been due to ships taking longer routes around the Cape of Good Hope rather than taking the shortcut through the Suez Canal to avoid attacks by Houthi rebels in the nearby Red Sea.
Conversely, freight forwarders are increasingly complaining about shippers’ failure to meet the Minimum Quantity Commitment (MQC) or Minimum Quantity Commitment (the minimum number of containers a shipper must transport with a given carrier during a given period of time at a specified level of service), also known as allocation.
The result: “Shippers receive unscrupulous price quotes and carriers receive unpredictable revenues,” Downes said.
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