What is an index-linked contract?
An index-linked contract ties your ocean freight rate to a chosen market index. Instead of agreeing a fixed price that can quickly fall out of step with the market, both parties use a transparent, market-driven benchmark to keep the rate aligned with current conditions.
Indexation is not new. Contracts have been adjusted in line with inflation or commodity prices for centuries, and it is standard practice in finance, construction, real estate, and government procurement. Index-linked contracts bring the same approach to ocean freight, where volatility, capacity swings, and macro-economic shocks regularly cause fixed contracts to break down.
Read the full Xeneta Indexing Guide
Why shippers and logistics providers use them
When they are set up well, index-linked contracts optimise cost, save time, and protect the supply chain.
Cost optimisation. In a traditional tender, months of negotiation can be undone overnight. Rates agreed in a falling market can leave logistics providers carrying contracts at a loss; when the market rises, cargo may be rolled, pushing shippers onto the spot market or back into renegotiation. Because an indexed rate moves with the market, both sides can be confident the price is fair. Shippers avoid overpaying in a rising market, and logistics providers protect their margins.
Increased productivity. Preparing and negotiating fixed-rate contracts typically takes four to six months a year, and shifting markets often force another two to three months of renegotiation. Indexing removes most of that cycle. Index-linked contracts also tend to run longer, often 18 to 24 months rather than 12, which saves everyone more time.
Supply chain resilience. When less energy goes into renegotiating price, more can go into service quality and long-term partnership. And because an indexed rate stays close to the market, your cargo is more attractive to ship and less likely to be rolled.
Fixed-rate versus index-linked, at a glance
| Factor | Fixed-rate contracts | Index-linked contracts |
|---|---|---|
| Market adaptability | Does not adjust to market moves | Stays aligned with real-time trends |
| Risk exposure | High risk when the market is volatile | Lower risk, pricing tracks the market |
| Negotiation | Frequent renegotiation when rates shift | Fewer renegotiations and disputes |
| Efficiency | More time on rate negotiation | Streamlined with automated adjustments |
| Relationships | Can strain when contracts turn unfavourable | Strengthened by fair, market-driven pricing |
| Budget predictability | Easy short-term, risky long-term | Strong long-term alignment; short-term depends on market stability |
| Fairness | Prone to disputes when the market moves | A trusted, neutral index keeps it fair for both sides |
Is indexing right for you?
You do not have to switch everything at once. A common starting point is to index a few representative lanes, prove the approach, and keep using Xeneta's other tools for traditional tendering on the rest. When you are ready, the Index-Linked Contract Simulator lets you model how an indexed contract would have behaved on your own lanes before you commit.
Next: see how indexed rates are calculated to understand the parameters that shape a contract.