Why are major US shippers still preferring annual ocean freight agreements despite market turbulence?

According to industry procurement executives, most major US shippers continue to favor annual agreements for budget predictability and operational planning, even though the 2024 transpacific eastbound contract season has been described as the most challenging on record. Annual agreements reduce internal forecasting complexity and provide line-of-sight to annual freight budgets, which appeals to finance teams and supply chain planners despite the inherent risks of locking in rates during volatile cycles.

What specific challenges did shippers face in the 2024 transpacific eastbound contract negotiations?

Stephanie Loomis, head of procurement at Noatum Logistics, described the 2024 transpacific eastbound contracting cycle as 'the most complicated and confusing' in her 30-plus-year career. The article suggests this was driven by continued market volatility, capacity uncertainty, and complex carrier positioning, though specific rate movements and capacity constraints are not detailed in the excerpt provided.

What are the alternatives to annual ocean freight agreements that shippers should consider?

The article references shorter-term contracts and index-linked alternatives as options shippers are evaluating. These models could provide greater flexibility to adjust to market conditions without the downside of being locked into unfavorable rates for a full year. Index-linked agreements tie rates to published indices, allowing both parties to share price discovery risk rather than absorbing it unilaterally.

How does this contracting trend affect procurement strategy for 2025?

The continued preference for annual agreements despite market chaos suggests procurement teams may benefit from hybrid strategies: securing a core baseline volume via annual contracts for planning certainty, while maintaining flexibility through shorter-term or spot agreements for incremental volumes. This approach balances stability with the ability to capitalize on market dislocations or navigate unexpected demand shifts.

What do rising contract season tensions signal about carrier-shipper relationships?

The turbulent negotiation environment reflects ongoing tension between carrier capacity management and shipper demand forecasting. As carriers experiment with new revenue management strategies and capacity controls, shippers are forced to negotiate in an increasingly asymmetric environment. The complexity of this cycle may accelerate interest in more dynamic contracting models that better reflect real-time market conditions.

Procurement

Moderate

Ocean Freight Contracting Shifts: Annual vs. Short-Term Deals

Jun 12, 2026

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The signal

The 2024 transpacific eastbound ocean freight contract season represents one of the most volatile and unpredictable negotiation cycles in recent memory, according to procurement leaders managing some of the largest US shipping volumes. Despite unprecedented complexity and market turbulence, major shippers continue to favor traditional annual fixed-rate agreements over alternative contracting models such as spot pricing or index-linked arrangements.

This preference reflects deep institutional inertia and the desire for budget certainty, even as the market environment makes such certainty increasingly elusive. Industry veterans describe the current environment as uniquely challenging, signaling structural shifts in how carriers and shippers approach capacity allocation and rate discovery.

For supply chain professionals, this dynamic underscores the need to reassess contracting flexibility and risk hedging strategies. The persistent reliance on annual frameworks despite contract season chaos suggests that shippers may be underutilizing alternative instruments—such as shorter-term agreements that could better match market dynamics, or index-linked models that distribute price discovery risk—to improve overall freight procurement efficiency and resilience.

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Simulation Suggestion

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What if shippers shift 20% of volumes to index-linked or spot contracts?

Simulate the impact of major US shippers reducing annual contract commitments from 70% to 50% of their transpacific capacity, redirecting the difference to index-linked and spot-market agreements. Model cost volatility, service level consistency, and procurement team workload under various rate environments (stable, rising, and volatile).

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strategic

What if carriers reduce annual contract allocation by 25%?

Simulate the cascading impact on shipper procurement strategies if major ocean carriers reduce the volume they're willing to commit to annual agreements (forcing more volume onto spot markets or forcing shippers to use smaller carriers). Model procurement team effort, risk exposure, and total landed costs under constrained capacity scenarios.

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What if transpacific eastbound rates spike 15% mid-contract?

Model the financial and operational impact on shippers locked into annual agreements if carrier rate increases occur mid-year due to capacity constraints, fuel surcharges, or route disruptions. Compare the impact on companies with 100% annual commitments versus those with 50% annual plus 50% flexible contracting.

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