Xeneta, the Oslo-based benchmarking and market intelligence platform for containerized ocean freight, has queired its worldwide database of contributors to uncover the main reasons businesses end agreements with container ship carriers.

Price, risk management and loss of trust were the three top culprits for shippers calling time on these relationships.

Xeneta is a global database of contracted ocean freight rates, with over 600 major international businesses providing the latest crowdsourced data on their shipping costs. These contributors, chiefly executives with shipping or supply chain responsibility, provide over 12 million contracted rates, covering more than 60,000 port-to-port pairings, on all main global trade corridors.

“One might expect bad service to be the main reason for swapping supplier,” comments Xeneta CEO Patrik Berglund, “but that isn’t the case in container shipping. The current state of the industry, with huge capacity oversupply leading to collapsing TEU rates, has effectively created a price war, pushing cost front of mind for anyone shipping large volumes of product.”

In the Far East-to-North Europe trade route, the market average price for transporting a 40-foot container has fallen by 45 percent since July 2014. “According to the clients we polled,” said Berglund, “this has created an environment where price is now the way of measuring an incumbent partner. If they aren’t prepared to offer something that is appropriate and in line with the market, then it’s time to switch carrier.”

Price may be top of the list with Xeneta’s contributors but for some , it’s not the sole consideration for switching. Risk management, in terms of supply, is also a factor.

“According to some of our shippers, shifts in trade lanes due to changing customer needs – such as a significant volume increase on one lane and a decrease on another – may result in an inability for an incumbent carrier to provide the requested capacity,” said Berglund. “If you think of retailers that need to react to changing market demands, it’s imperative that their supply chain is both reliable and flexible. A carrier that can’t meet those criteria is simply too much of a risk.”

There are signs that the market is now picking up and prices are increasing, and this creates a new risk. “For shippers that negotiate long-term rates when the market is low there is a danger of rolling cargo, whereby their products are left on the docks to make way for shippers paying higher prices,” Berglund explained. “The resultant loss of sales is a far more frightening scenario that just paying a few hundred dollars more in rates.”

Loss of trust was the last of the top three, with bad experiences or contractual failures undermining relationships that may otherwise have prospered. Again though, price was often a key factor.

According to Berglund, some container ship carriers price strategically to win market shares, but then a few months into the relationship try to adjust rates to meet their business requirements.

“Shippers rely, and base their entire operational plans, on the information provided by their suppliers, such as guaranteed capacity, transit time and pricing, so the commitments that are made during the procurement process must be honored,” he added. “If they don’t do that, they don’t keep the business.”