The spot freight market

HOW SPOT PRICING INTERACTS WITH LONG-TERM CONTRACTS

The spot freight market in liner (container) shipping has expanded significantly over the past decade and now plays a structural role alongside annual or semi-annual carrier contracts. In practice, most shippers operate in a hybrid environment where long-term agreements provide baseline capacity and governance, while spot procurement is used for flexibility, price discovery, and tactical optimization.

Market events have reinforced this duality. Disruptions and rerouting (e.g., via the Cape of Good Hope) have periodically reduced effective capacity and increased operating costs—driving rate volatility across 2024 and into 2025. (UN Trade and Development (UNCTAD))

Three procurement structures in ocean freight

In the shipping industry, three common procurement approaches are used:

1. Directly with carriers under long-term contracts
2. Primarily through spot market procurement
3. A dual-channel strategy (contracts + spot)

1) Carrier long-term contracts (baseline control)

Long-term agreements are primarily used to:

• Secure baseline capacity (or priority access) on strategic lanes
• Stabilize budgeting with agreed rate structures and review mechanisms
• Establish operational governance: service levels, cut-offs, documentation rules, escalation paths
• Reduce exposure to extreme spot swings in tight markets

2) Spot market only (maximum flexibility, maximum volatility)

Spot procurement can be attractive when volumes are irregular or when the market is soft, but it typically increases:

• Rate volatility and budget uncertainty
• Rollover risk / lower service priority during peaks
• Administrative effort (quotes, booking variability, documentation differences)

3) Dual channel (best practice for many shippers in 2026)

A dual strategy treats contracts as the “capacity and governance backbone” and spot as the “optimization and resilience layer.” It allows the shipper to:

• Protect core flows with contracted allocations
• Absorb peaks and exceptions via spot
• Benchmark contract competitiveness continuously
• Maintain commercial tension without destroying partnerships

This is also why many shippers are moving toward index-linked or benchmark-referenced contract mechanisms(rather than “set-and-forget” fixed pricing). (Xeneta)

Carrier vs shipper incentives (the real dynamic)

A spot-heavy environment is not automatically “bad for carriers,” but it does increase revenue volatility and reduces demand visibility, which complicates network planning, equipment positioning, and service commitments. From a shipper perspective, spot access can increase utility by improving:

• Flexibility (capacity top-ups, new lanes, one-off opportunities)
• Cost performance in soft markets
• Negotiation leverage (credible alternatives)

The shipper’s behavior is typically cautious under uncertainty: shippers aim to secure minimum service continuity through contracts, then use spot tactically to manage volatility and exception flows.

2026 contracts: control the add-ons, not just the base rate

Good contracts help you control total cost and avoid expensive surprises. In 2026, that means tightening governance on the “variable layer,” including:

• Surcharge governance (clear rules for fuel, peak season, imbalance, equipment, congestion)
• Demurrage/detention principles (free time rules, dispute process, escalation)
• Rollover and service commitments (service levels where possible; transparency if not)
• Data and documentation accountability (who owns what, by when, and with what evidence)

Decarbonisation cost drivers now matter commercially

For EU/EEA-related trades, carriers increasingly pass through regulatory cost components:

• EU ETS for maritime reaches 100% surrender coverage by 2026 (after 40% in 2024 and 70% in 2025) and expands scope to additional gases from 2026. (Climate Action)
• FuelEU Maritime is fully applicable from 1 January 2025, driving compliance behaviors and cost mechanisms. (Mobility and Transport)

Consultant rule: if you do not define ownership and calculation principles for these components, you will get “unpriced variability” later—typically via opaque surcharges.

Freight bids and the spot freight market

While negotiated tariffs with dedicated carriers remain the foundation for many shippers, you can complement your transportation strategy by using the spot market in two disciplined ways:

A) Competitive spot bidding (tactical)

Use spot bids to:

• Cover overflow volumes, irregular lanes, or urgent shipments
• Exploit temporary opportunities (backhaul needs, network imbalances, last-minute space)
• Validate whether your contract rates remain aligned with the market

B) Comprehensive bids for annual volumes (strategic)

Use an annual or semi-annual tender to:

• Re-baseline your rate structure and routing guide
• Introduce performance commitments, transparency, and governance
• Allocate volumes across a core/secondary portfolio

Key point: market testing is not incompatible with a “key carrier” strategy. If governed correctly, it improves your matching of demand to true capacity and gives core partners a clearer view of your real shipment profile—often enabling better re-pricing and operational alignment. (Xeneta)

How to use spot without undermining your core partners (practical governance)

A robust model is to define an explicit allocation policy, for example:

• 70–85% contract allocation (strategic lanes, predictable flows)
• 10–25% spot / mini-bid allocation (exceptions, peaks, benchmarking)
• 0–10% specialist allocation (DG, reefer, OOG, high-risk corridors)

Then enforce guardrails:

• Spot cap by lane (avoid accidental overexposure)
• Minimum service rules (cut-offs, documentation requirements, VGM timing, etc.)
• “All-in” quote discipline (what is included/excluded; avoid hidden accessorials)
• Benchmark cadence (quarterly lane checks, or trigger-based checks when indices move)
• Escalation rights (what happens if a spot booking rolls or equipment is not supplied)

Quick checklist

Before using spot to “save money,” validate:

1. Is this shipment strategic (service-critical) or tactical (price-flexible)?
2. What is the true “all-in” cost (base ocean + local charges + accessorial risk)?
3. Who owns schedule reliability risk (rollovers, blank sailings, cut-offs)?
4. Are compliance/document rules identical to contracted flows?
5. Do you have a spot allocation cap and an escalation path if execution fails?
6. Are you using market intelligence to avoid buying at the top of the cycle? (Xeneta)