US Retailers’ Ocean Shipping Rate Woes Ending, However, A New Set Of Delays Threaten

Collapsing ocean shipping rates could seem to be good news for U.S. retailers, but they are now bracing for delays as some carriers try to prop up prices by cancelling voyages.

Retailers reportedly paid approximately $20,000 to shift a container of goods during pandemic disruptions.

Port Of Long Beach
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Carriers, including Maersk and M.S.C., are considering boosting rates by cancelling voyages. This might spark cargo delays since containers typically get bumped from one vessel to the next, the specialist mentioned ahead of a significant U.S. ocean shipping conference held this week in Long Beach, California.

The event, named TPM23, reportedly marks the unofficial initiation of the container shipping deal negotiating season when carriers and its U.S. customers ranging from Walmart Inc to pop and mom merchants and exporters of stripes, hammer out annual rate and volume delays.

Those who were closely watching and often contentious, negotiations matter as the Asia-U.S. trade channel is the most lucrative for carriers, and the deals set the tone for further discussions in different regions.

Any shipper savings gleaned from the deals could come with new problems —pretty late deliveries.

The Port of Los Angeles has reported about 17 cancelled voyages in January 2023 and, at the same time, warned of many more that lie ahead.

If these carriers keep bumping the containers, there’s the scope of missing Christmas, said Isaac Larian, chief executive associated with M.G.A. Entertainment, the Southern California toy maker.

M.G.A.’s team has switched about 75% of shipments of products such as L.O.L. Surprise! and Rainbow High dolls to the relatively shorter-term spot market from the longer-term contract market.

The firm is reportedly paying approximately $1,150 per container — incurring a significant cost savings of over $18,000 from the peak, Larian mentioned.

Volatile spot rates were the first that plummeted when pandemic-weary buyers shifted their spending from goods to entertainment and travel.

The gap between contract and spot rates is reportedly closing, pressured by recession and competition to fill vessels, mentioned Peter Sand, the chief analyst at ocean and air freight rate benchmarking platform Xeneta.

The Shippers’ Revenge

When the demands were booming, the carriers made significant profits by emphasizing the most lucrative cargos. Critical buyers had been jostling for space, and those similar to Costco Wholesale Corp, Walmart, and Dollar Tree Inc reportedly chartered vessels to keep the shelves well-stocked.

However, the tables have now turned, and the shippers seek payback for their ocean cargo costs that reportedly quadrupled in a few cases.

It can be explained as “shippers’ revenge,” per Jon Monroe, an experienced industry consultant and a North American representative associated with Singapore-based Transfar Shipping, the investors of which also include China e-commerce and major Alibaba.

Earlier loyal customers are comparison-shopping, spreading the business around, and gambling on the spot market, specialists explained.

The nonbinding nature of ocean contracts drives carriers and customers to push for everything they can get when the leverage swings in their favour, said Lawrence Burns, a consultant who used to handle negotiations for Hyundai Merchant Marine.

This time, exporter and importer shipping managers, whose costs exploded when they had been unexpectedly compelled into the sky-high spot market, get the upper hand.

Asked if large customers are signing contracts at near-spot rates, M.S.C. VP Allen Clifford mentioned that some are.

Soren Toft, the C.E.O. of the world’s most excellent carrier, refused to comment onstage at the TPM23 on Monday.

Carriers and customers do not frequently discuss contract discussions. Still, in earnings calls, the officials for Walmart – the top U.S. container shipper – furniture retail giant La-Z-Boy, popular toy maker Mattel Inc, and famous musical instrument major Yamaha mentioned that they expected to benefit from the reduced rates.

References: Reuters, NY Post

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