Surging Freight Rates & Procurement Strategies to Combat Them

Author: Gareth Dobbs | Read time: 9 minutes

Freight rates are up—significantly. You already know this—and you've probably seen this pattern before. Since 2022, ocean freight rates out of Asia have spiked 35-45% multiple times: in 2022, again in 2023, 2024, and now in mid-2026.

This year, rates have already effectively doubled from their low point, following the same seasonal and cyclical pattern we've seen repeat every year since the pandemic (oddly enough timed right after contract signing every year).

What's Actually Driving the Rate Surge

The current rate environment has multiple root causes, and understanding them matters because they inform your negotiation strategy:

Vessel Capacity Constraints

Alliances that dominated global shipping have undergone major consolidation. Post-pandemic ordering of new vessels was conservative, and supply chain disruptions mean new ships are arriving slower than expected. With limited capacity competing for peak-season volume, carriers have pricing power. This isn't temporary—new vessel deliveries are scheduled through 2027, so capacity constraints will persist.

Fuel Volatility

Bunker fuel has climbed and remains elevated due to refinery constraints and geopolitical factors. A $10/barrel swing in oil prices translates to $500-800 per container in fuel costs. Carriers are locking in bunker surcharges higher than historical averages because they're hedging against further spikes.

Demand Imbalances

The pattern is structural: massive exports from Asia to North America, tepid return demand. The imbalance means carriers have to position empty containers back, and that cost is passed to shippers. This is driving the persistent imbalance fees you see in your ocean freight quotes.

Port and Infrastructure Constraints

Labor shortages at major ports, aging infrastructure, and congestion mean dwell times are up, port charges are climbing, and terminal handling costs have increased 15-20% since 2024. These aren't carrier costs—they're systemic port problems—but they get passed through in your freight bill.

Consolidation and Rate Control

Here's the pattern most shippers don't see clearly: When major logistics companies acquire competitors or when carriers expand through M&A, there's an immediate post-close playbook: implement massive surcharges, tighten capacity allocation, and hold rates high while competitors are distracted with integration.

We've seen this repeatedly over the last 5 years. Deals close, rates spike 20-30% within 60-90 days through surcharges and capacity controls, and by the time competitors react, the new rate environment is normalized. The acquiring company has locked in higher margin, and shippers who didn't anticipate this are stuck in contracts at the old price.

The uncomfortable truth: you probably can't control the market rates themselves. Fuel prices, vessel capacity, global demand, port constraints, and consolidation dynamics are systemic forces bigger than any single shipper. What you can control is how you procure, negotiate, and structure your freight decisions. That's where most shippers leave money on the table—and where smart companies gain competitive advantage.

The Strategic Problem with How Most Shippers Contract

Most shippers sign one-year contracts. This is the industry standard, and it makes sense: gives carriers enough certainty to allocate capacity, gives shippers enough time to plan. But here's the problem: when you sign a one-year deal at today's rates, you're locked in for 12 months. If the market moderates in month 3, you're overpaying for 9 more months. If the market spikes further, the carrier has you locked in at the "good" rate and you've lost upside.

More importantly, most one-year contracts are negotiated as pure fixed rates with carrier discretion on surcharges. So even if the base rate is competitive, surcharges for capacity constraints, congestion, fuel, or peak season can easily add 15-25% to your total cost—and carriers control those. You're "locked in" but not actually protected.

This is why the standard one-year fixed contract is increasingly risky in volatile rate environments. You need a different approach. Consider a different rate procurement strategy for your freight.

Smart Procurement Strategies for a High freight Rate, Volatile Market

The goal isn't to predict the market or outsmart carriers. It's to structure your volume so you're always close to what the market is actually paying, with built-in flexibility to respond when conditions change.

1. Split Your Volume: Long-Term Stability + Short-Term Market Exposure

Instead of putting all your volume in one annual contract, split it:

60-70% on a longer-term or index-linked contract (protection, carrier certainty)

30-40% on quarterly or monthly spot/flex agreements (market flexibility)

This hybrid approach means:

• Your base volume has rate stability (carriers get the certainty they want)

• You always have 30-40% of volume repricing monthly or quarterly (you stay close to market)

• If rates drop, you're only locked in on 60-70%; the rest reflects the market

• If rates spike, your long-term piece protects you from paying full market on your entire volume

• Carriers are happy because 60-70% is committed; you're happy because you're not betting your entire year on today's rates

2. Keep 30-40% on Quarterly or Monthly Deals (Always Close to Market)

The key to thriving in volatile markets is staying close to the market. Monthly or quarterly rolling contracts force this discipline. Every 3-4 weeks, you're talking to carriers about rates. You see where the market is. You can take advantage of downturns. You're not surprised by surcharges because you're renewing frequently and negotiating terms continuously.

Carriers don't love monthly deals (they prefer longer certainty), but they'll accept them if you've given them 60-70% on a longer-term commitment.

And here's the leverage: "We'll give you 60-70% committed for 12 months if we keep 30-40% flexible to catch market movements."

What you watch in monthly/quarterly repricing:

• Bunker prices (is surcharge justified or are carriers padding?)

• SCFI or NYFI indices (where is the market actually trading?)

• Capacity (are they still tight or are they loosening?)

• Competitive quotes (are other carriers undercutting?)

This keeps you honest and keeps them honest.

3. Use Index-Linked Contracts for Your Long-Term Base (The Game-Changer)

For the 60-70% you're locking in long-term, consider index-linked pricing instead of pure fixed rates. This is where things get sophisticated.Index-linked contracts use an industry benchmark tied to actual shipped cargo instead of a "negotiated paper rate."

The most relevant example: NYFI (New York Freight Index) offered through platforms like NYSHEX tracks ocean freight from Shanghai to Los Angeles based on real spot transactions.How it works: Your rate becomes: index price + your negotiated premium (say, -$200/container for consistent volume).

Why this matters:

• Carriers can't unilaterally raise rates through surcharges—the rate is tied to the index

• They can't artificially constrain capacity to hold rates high—they live with whatever the market is

• When rates are high (like now), you pay market + your premium. When rates moderate, you benefit immediately

• You share risk with the carrier instead of trying to outsmart the market with a fixed contract

• Surcharges are eliminated or severely limited because the rate already reflects market conditions

The trade-off: You don't get certainty.

If rates spike to $3,000/container, you pay $3,000 + your premium. But historically, index-linked pricing has protected shippers better in volatile markets because the incentive for carriers to play games with capacity and surcharges disappears. They can't make money gaming the spread—they make money on the premium you negotiated.

Who uses this: Large shippers with consistent volume. It requires clean data and discipline, but it's becoming standard for anyone serious about freight optimization.

4. If You Use Traditional Fixed Rates (For Your Remaining Volume), Get the Terms Right

Not everyone is ready for index-linked pricing.

If you're negotiating fixed rates for part of your volume, make sure you actually have terms that protect you:

Specify exactly which surcharges are allowed. Too many shippers sign contracts and then get hit with mysterious surcharges.

Be explicit: "Only bunker, peak season, and port congestion surcharges allowed. Bunker surcharge capped at $X per container. No imbalance fees, no emergency fees, no undisclosed charges."

Build in adjustment clauses. "If bunker prices exceed $X/barrel for 30+ consecutive days, rates adjust. If they drop below $Y, we both benefit."

Cap total upside exposure. "Base rate is $2,000. With all allowed surcharges, rate will not exceed $2,400."

These terms reduce the risk that you're locked into something that becomes uncompetitive mid-contract.

5. Get Your Data Clean

Carriers price based on what they actually see from you: shipment patterns, dwell times, weight/dimension consistency, exceptions, service disruptions. If your data is messy (inconsistent shipper information, unclear incoterms, frequent change requests), carriers will price defensively—i.e., expensively.

Before you bid anything, audit your last 12 months of freight:

What are your actual patterns?

Where do service issues cluster?

What's driving complexity?

Clean data forces carriers to price competitively instead of defensively.

6. Segment Your Volume Intelligently

Don't bid all your freight at once as a monolithic RFP. Segment by lane, by mode, by service requirement, by seasonality. Carriers are better at some things than others. By segmenting, you force each carrier to bid what they're actually good at, and you create room to negotiate. A carrier that's expensive on your secondary lanes might be very competitive on your primary ones. You won't see this in an undifferentiated bid.

7. Define Service Levels Explicitly

Vague service requirements lead to vague pricing. "Fast delivery" or "cost-effective" means nothing to a carrier. They'll assume worst-case and price high.

Instead, be specific:

"95% of shipments deliver within X days; 99% within X+2 days; service failures trigger credits."

Explicit service specs let carriers bid what they can actually deliver and at what cost.

The Architecture: 60/30/10 Model

Here's how this comes together in practice for a mid-market shipper:

60% of volume: 12-month index-linked or hybrid contract (base rate + variable tied to bunker/SCFI)

30% of volume: Quarterly rolling agreements (reprices every 3 months, always close to market)

10% of volume: Monthly spot for opportunistic purchasing (if you see a rate drop, you can shift spot volume to that carrier)

Result: You're never far from the market.

You have carrier stability on 60%. You catch downturns on 30-40%. You're protected from capacity games and surcharge manipulation.

The Reality: You're Playing a Different Game Than Last Year

Five years ago, procurement was about finding the cheapest provider. Now it's about structuring arrangements that protect you when markets are volatile and carriers are consolidating.The companies winning at freight procurement right now aren't the ones chasing the lowest fixed rate.

They're the ones who:

• Understand what's actually driving rate spikes (capacity, fuel, consolidation dynamics)

• Split their volume across different contract types (long-term + short-term, fixed + indexed)

• Use quarterly or monthly repricing to stay close to market on 30-40% of volume

• Have clean data so carriers can price competitively

• Segment volume so they have multiple levers to negotiate

• Know the difference between a competitive fixed rate and a fixed rate that becomes uncompetitive in month 6

The uncomfortable truth: the rate surge is real, and you probably can't prevent it. But how you structure your procurement determines whether you pay 5% above market or 25% above market. In a $5M annual freight budget, that's the difference between $250K and $1.25M in unnecessary cost.

And here's the really uncomfortable part: if you lock all your volume into a one-year fixed rate right now and the market moderates in 6-9 months, you'll have overpaid tens of thousands of dollars because you couldn't respond.

What This Means for Your Next Procurement Cycle

Your next freight bid shouldn't start with "What's the best fixed rate we can lock in for the year?"

It should start with:

• "How do we structure 60% of volume for stability?"

• "How do we keep 30-40% repricing regularly so we stay close to market?"

• "Should we use index-linked pricing for our base volume?"

• "What happens to total cost if we split volume this way?"

That conversation looks very different, and it leads to very different—and better—outcomes.

Are you structuring your procurement for a volatile rate environment?

I can help you evaluate whether Freight Procurement Consulting would be valuable.

Given what's happening in the market, this matters more than it used to.