In a volatile market, a fixed-rate contract can come under pressure from both sides. An index-linked contract lets the rate follow the market in return for stronger allocation and service commitments. Here is how to structure one for your 2027 Europe tender.
Meet Anna, our fictional persona. She is Head of Logistics Procurement at ACME Home Furnishing GmbH, a home furnishings importer in Hamburg moving about 1,500 FEU a year from Shanghai and Ningbo to Hamburg and Rotterdam. Her 2027 Europe tender is now under way, and decisions are due by mid-December.
For the first five months of 2026, the market sat below her contract, with NYFI Asia–North Europe at around USD 2,000–2,400. Her management asked why they were paying above market, and Anna went back to her carrier to look for savings. Then, from June, the market climbed through her contract rate and peaked at close to double at around USD 5,000 in July. Some of her bookings were rolled, amendments and additional surcharges followed, and by August finance was asking why freight costs were running above budget. All Anna could say was; "When the market moved, the rate we agreed in good faith came under pressure."
Now during the 2027 Europe tender season, some carriers are offering her fixed rates for 2027 again, and some are introducing Index-linked contracts. This time Anna is asking a different question: how does she avoid a repeat of 2026? If the rate could follow the market, what would she be able to get in return via firmer commitments on space and service?
A fixed rate contract works well while the market stays close to it. When spot and contract rates drift apart, both sides come under pressure, and nobody is at fault. When demand is high and markets are tight, carriers are forced to prioritise higher paying cargo. When rates are low, shippers need to make savings to ensure their budgets can be hit. It is one of the main reasons average contract fulfilment in container shipping is only around 65%.
Even where contracts hold, the adjustments cost both sides time and money: surcharge discussions, amendments and mid-year renegotiations. In Anna’s experience; "We tender once a year and then renegotiate all year." Index-linked contracts offer a solution.
An index-linked contract (ILC) changes how the contract price is set, and what each side commits to in return. It has five parts:
Let's take Anna's 2026 contract and rebuild it as an ILC, using illustrative terms:
When the market rises, her rate rises with it, so the carrier has less reason to prioritise other cargo. When it falls, her rate falls too, so there is far less internal pressure to renegotiate. The offset is where the negotiation now happens, and it is a negotiation about service and volume rather than a bet on where the market goes.
Index-linked contracts are no longer a niche structure. In NYSHEX research and carrier interviews:
An index-linked contract takes much of the friction out of a volatile year, but it does not give Anna a fixed budget number. Her freight bill now moves with the market in both directions, and her CFO, Markus, will still want to know how far it could move.
That uncertainty isn't new. Under her fixed contract, renegotiations, amendments and surcharges already moved her actual cost away from budget, just less visibly. An ILC makes the exposure transparent, and that makes it possible to manage. An ILC that references a hedgeable index can be combined with futures or options to fix or cap the cost of part of the volume. Many shippers also split their portfolio between fixed, index-linked and spot.
It isn't right for everyone. If your volumes are small or irregular, or a carrier won't offer stronger commitments in return, a fixed contract plus spot may still be the better fit.
Anna's ask for her 2027 tender: "Can you offer an index-linked option for part of my volume, say 30–50%, referencing an established index for my trade, with guaranteed allocation and no rolling in return?" Comparing that offer with the carrier's fixed rate shows her how much she would pay for price certainty, and what she gets for giving it up.
Join our NYFI Webinar: Anna's Tender - Designing a Contract That Doesn't Break. Live on Thursday 19 November at 09:00 CET (Europe & Asia) and 16:00 CET / 10:00 ET (Europe & US). Rich Heath reviews Anna's last contract and rebuilds it as an index-linked one.
Pick your run and register for the webinar here: https://nyshex.com/webinar.
This blog is part of our series following Anna through the 2027 Europe contracting season, leading up to two live NYFI webinars on 19 November and 10 December. Read more here:
Want to compare plans first? See what's included in NYFI PRO.
NYFI is published weekly, every Friday at 10:00 ET, based on rates for cargo shipped in the previous week. Lane examples in this article are illustrative.
This article is for general information only and is not investment advice. Trading futures and options involves risk, including the loss of the premium paid.
This article is for general information only and is not investment advice. Trading futures and options involves risk, including the loss of the premium paid.
Want to see how an index-linked contract with a hedge would have performed on your lanes? Simulate your contract with NYFI here.
Want to see how an index-linked contract with a hedge would have performed on your lanes? Simulate your contract with NYFI here.
Want to see how an index-linked contract with a hedge would have performed on your lanes? Simulate your contract with NYFI here.
Want to see how an index-linked contract with a hedge would have performed on your lanes? Simulate your contract with NYFI here.
Want to see how an index-linked contract with a hedge would have performed on your lanes? Simulate your contract with NYFI here.
Want to see how an index-linked contract with a hedge would have performed on your lanes? Simulate your contract with NYFI here.
Want to see how an index-linked contract with a hedge would have performed on your lanes? Simulate your contract with NYFI here.
Why it matters for the container freight derivatives market
Why it matters for the container freight derivatives market
Why it matters for the physical market
Illustrative figures only. They exclude brokerage, clearing fees and margin, and do not reflect actual NYFI levels or option prices.
• A call option protects against rising rates. It pays out if NYFI settles above the agreed level. The natural buyers are those who pay for freight and want protection against rising rates: shippers, BCOs and NVOCCs buying capacity.
• A put option protects against falling rates. It pays out if NYFI settles below the agreed level. The natural buyers are those who sell freight and want protection against falling rates: carriers, and NVOCCs selling at market-linked prices.
Two numbers define every option. The strike price is the NYFI level where protection starts. The premium is what you pay upfront for that protection. A strike close to today's market rate gives more protection and costs more. A strike further away costs less and only pays out on a bigger rate move, much like choosing the deductible on an insurance policy.
Consider an illustrative example of an options hedge. A European importer ships 300 FEU a month from Asia to North Europe on an index-linked contract that moves with NYFI, so its freight bill rises and falls with the market. It has a Q1 freight budget of $3,000 per FEU, or $2.7 million for the quarter. To protect that budget, it buys call options with a $3,000 strike and pays a premium of $150 per FEU. If rates spike and NYFI settles at $4,200, the importer pays $4,200 under its contract, the option pays the $1,200 difference above the strike, and the net cost is $3,150 per FEU: the strike plus the premium. That's $945,000 less than the unhedged bill. If rates soften and NYFI settles at $2,400, the option expires unused, and the importer pays $2,400 plus the $150 premium, a net $2,550 per FEU, well under budget. Either way, the worst case was known on the day the option was bought.
Want to see how an index-linked contract would have performed on your lanes? Simulate your contract with NYFI here.
Want to see how an index-linked contract would have performed on your lanes? Simulate your contract with NYFI here.
Why fixed rates break