By: Rich Heath, NYSHEX VP of Financial Products
I am often asked about the differences between indices: quoted or booked rates vs. shipped, different definitions of “spot,” different container sizes, the organizations providing rates, index panels vs. crowd-sourced data, and different regulatory and compliance standards. Do all these differences matter - and if so, which index is ‘best’?
The truth is that all indices measure the market slightly differently. Which one is best—and which parts of the methodology actually matter—depends on your expectations of the index and how you plan to use it in your business.
To demonstrate what matters and when, we will look at the difference between an index based on booked rates and the NYSHEX Freight Index (NYFI) - which is based solely on shipped rates - and how the two indices perform when used as the source for an index-linked contract.
Booked vs Shipped rates: What difference does this make to the index?
Bookings-based indices price intended shipments. Some shipments won’t sail at the quoted level, and some won't sail at all, so the index will be slightly forward-looking but less accurate than actual paid rate levels.
Shipped-based indices (e.g., NYFI) include only completed moves. The index publishes with a short lag but better represents the prices that buyers and sellers actually paid.
When the market changes quickly or new surcharges are implemented, these differences can have a significant impact on index behavior.
Case study: June and July PSS on Asia to USWC
In late May and June, several carriers announced Peak Season Surcharges of between $2,000–$4,000 per FEU becoming effective on June 1, June 15, and July 1.
The bookings-based index shows a sharp reaction to the June 1 PSS: it rises in the last week of May, jumps again in early June, and then falls back to pre-PSS levels within just two weeks. This produces a pronounced four-week spike that peaks above $5,500 per FEU.
NYFI (shipped-based) began rising in the second week of June, peaked around June 20 (reflecting shipments that included the June 15 PSS), and returned to pre-PSS levels by mid-July—showing a lower, longer, six-week arc.
Why this matters for index-linked contracts
Assume a simple index-linked structure: freight rate = index monthly average (no offset), and compare this to the spot market.
Large disparities between contract and spot rates drive contract breakage. When a contract rate sits well above spot, shippers are incentivized to push volume into the spot market. When spot is far higher, carriers prioritize higher-yielding cargo. Index-linked contracts aim to relieve these pressures by keeping contract rates aligned with spot and minimizing major gaps.
In this example, a contract referencing the bookings-based index misses that goal: the May rate is more than $1,000/FEU above spot. A BCO on such a deal will face strong pressure to chase savings, straining the carrier relationship. An NVOCC cannot profitably buy at $1,000/FEU above the market and resell. The practical choices are to abandon the contract or renegotiate aggressively to bring rates back to market.
Conclusion
While this example is simplified and the index-linked contracts are fictitious, the index levels and behavior are real. Do differences between indices matter? For index-linked contracting, very much so.
The bookings-based index provides a useful forward view and correctly signals direction, but the inclusion of unshipped rates overstates levels and pulls pricing forward. As the market cools, it also drops faster than reality producing a shorter, higher spike than rates at which cargo actually moves.
NYFI lags slightly, yet as a settlement index, it offers a more accurate basis to keep contract rates in line with spot movements. Aligning incentives this way makes it easier for both sides to honor the contract, preserve relationships between carriers, shippers, and NVOCCs, and reduce the constant churn of renegotiation.