Freight Futures: Your Time Is Gonna Come

Freight Futures: Your Time Is Gonna Come
Looking forward into 2023, we are considering what kinds of services and solutions we can add to the CoLoadX Marketplace in order to strengthen our position as the go-to place for booking container freight online. One area I keep thinking about is "risk" — as my favorite supply chain guru Corey Billington would say "risk costs.” What has historically been an uncertain process has, especially since the COVID-19 pandemic, only gotten more uncertain thanks to the many well-publicized global supply chain disruptions. Since 2020 container rates have risen and fallen 817%, a volatility that increases costs for businesses struggling to manage and forecast budgets.

Navigating such rough seas (heh!) requires an effective tool to manage the risk. Futures—long established in other industries and applications—can be this tool for container freight. One form of futures is a forward contract. Forward contracts are financial instruments that allow companies to lock in a price for container shipping at a future date. This can be useful for companies that need to transport goods internationally, as it allows them to hedge against fluctuations in container rates.

There are several benefits to buying and selling container freight futures. First, it allows companies to better predict and budget for their shipping costs. By locking in a fixed price for future shipments, companies can more accurately forecast expenses and plan budgets.

Second, container freight futures can help companies manage their risk exposure. If container freight rates rise unexpectedly, companies that have locked in a lower rate through a futures contract will be protected from the price increase. This can help companies avoid financial losses and maintain profitability.

Finally, container freight futures can also help companies secure capacity on ships and ensure that their goods are transported on a timely basis. By locking in a futures contract, companies can guarantee that they will have space on a particular vessel, which can be especially important during times of high demand or when there are disruptions to the supply chain.

We think the time is now for container freight futures. Look for our next blog post where we'll discuss the other type of futures: speculative futures. 
By: on Feb. 14, 2023, 9:14 p.m.