Gordon Downes, the CEO of the recently created New York Shipping Exchange (NYSHEX), reckons he can fix a massive hole in liner earnings.
Launched this August, NYSHEX provides the container shipping industry a new way to contract ocean freight, where the shipments are guaranteed by the carrier and committed to by the shipper.
The exchange allows shippers and carriers to digitally enter contracts directly with one another, where rates are fixed and all-in, service levels are guaranteed, and shipments can be contracted from one week up to six months in the future. Five of the top ten global container carriers are already working with NYSHEX including Hapag-Lloyd, CMA CGM, MOL, COSCO Shipping and OOCL.
Downes says carriers have been losing vast sums of money over the years thanks to shippers’ failure to show up.
“Container shipping is an inherently perishable service,” he says. When a ship sails across the Pacific with an empty slot that should have been filled with a container, the value of that slot is immediately perished or wasted, he explains. “These issues explain why rate volatility has increased, and carrier earnings as well as service levels have deteriorated since 2008,” Downes argues.
“Fortunately there is a way for the industry to capture an additional $23bn of economic value each year – which is enough to completely transform the industry,” the exchange boss claims, citing a figure from a couple of American professors.
“This can be achieved even in the current market merely by improving contract compliance,” Downes elaborates. “The principle is; if shippers and carriers can begin to truly rely on each other, everyone can reduce cost and everyone stands to benefit. Shippers can better plan their supply chains, reducing working capital and contingency costs. Carriers can improve their networks to provide services that better match the needs of the shippers, and at the same time avoid deploying ships that would otherwise sail underutilised.”
Downes is very proud of the fact that thousands of teu were contracted and shipped through NYSHEX in 2017, and more than 99.8% moved exactly as contracted. This is much better than the industry average where only 76% of shipments are shipped as contracted or as booked.