$13 million round will help accelerate development of digital forward contracts for container shipping
The New York Shipping Exchange (NYSHEX) has secured a Series A round of funding for $13 million, according to a press release. The company has developed the first digital forward freight contract for global container shipping.
The Series A investment drew in investments from prominent companies such as Goldman Sachs and GE Ventures as well as CMA-CGM and Hapag-Lloyd.
Japan-based Mitsui OSK Lines Ltd, better known by its business nickname MOL, is working with NYSHEX, according to a report by the Midwest Shippers Association.
NYSHEX offers cargo container shippers “a simplified and standardized ‘over-the-counter’ exchange for entering enforceable freight contracts.” The Midwest Shippers Association report further explained that “shippers can then commit to sending cargo under the deal, and are required to back up their commitment with a bond, cash deposit or insurance policy.”
One market that the NYSHEX has successfully cornered is the non-vessel operating common carrier (NVOCC) market, aka brokers or forwarding agents. The Federal Maritime Commission grants licenses to most foreign-based forwarding agents that plan to operate in the United States. NVOCCs are often confused with a freight forwarder except that an NVOCC offers its own contracts to a shipper and does not operate any vessels, according to Ship It.
The Series A round attracted other global shipping companies like France-based CMA CGM. The company announced its participation on its own website. CMA CGM has been conducting 80% of its transactions “by electronic means.” It was congruent with the company’s e-commerce platform development that includes the development of a mobile app.
Rodolphe Saade, CEO, emphasized the compatibility between CMA CGM and NYSHEX, stating “digitization is essential to offer our customers new and differentiated products.”
Mark Chadwick, GE Venture’s Executive Sourcing Leader, views the Series A investment as “addressing some of the most fundamental problems facing the ocean shipping industry today – uncertainty and inefficiency.” This is best demonstrated among some options provided by NYSHEX as alternatives to the spot market contract and the traditional long-term contract, as follows:
1. 99% reliability shown through “a significantly more reliable supply chain,” detailed invoices, enforceable contracts and fixed rates;
2. Liquidated damages – this will be paid by the carriers upon failure to fulfill contracts;
3. All-in rates – charges will be one-time similar to all-inclusive charges “tacked onto offers on NYSHEX”
4. Volatility sensibility – rates are predicted based on the “lack of volatility of current rate prices”
Thorsten Haeser, Chief Commercial Officer of Hamburg, Germany-based Hapag-Lloyd, simplified its reason for investing in NYSHEX, noting simply that it’s because of “the challenge of unreliability and unpredictability that affects everyone in the containing shipping industry.”
Having digitized platforms provided by NYSHEX creates value through products that best meet supply chain needs. Haeser is confident that NYSHEX ensures “commitments are met by both sides.”
By having Hapag-Lloyd and CMA-CGM as global partners in the Series A round of investments, NYSHEX’s CEO Gordon Downes was pleased.
“This demonstrates the industry’s confidence in the role that NYSHEX is playing in global shipping,” he said.