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COSTS to ship goods from Asia to the US are turning spiralling upward, but American importers appear to be absorbing the higher prices after watching freight rates plummet this year from record highs, reports The Wall Street Journal.
The average spot rate to ship a 40-foot container from China to the US West Coast rose 61 per cent during the six weeks through August 15 to US$2,075, according to transportation data and procurement firm Xeneta.
The increase came as big shipping lines raised their listed prices after rates on the sector's spot market plunged from nearly $10,000 a box in February 2022 to below $1,300 in late June, as overstocked retailers pulled back orders and weakening demand cut into earnings at big shipping lines.
Tim Smith, director of global transportation and logistics at Gabe's Old Time Pottery, said the abrupt upturn in rates has had only a limited impact on the home-goods retailer. The company earlier this year hedged its bet on shipping, he said, locking in half its freight at fixed rates that now are lower than spot prices.
Xeneta's chief analyst, Peter Sand, said that before the pandemic a big jump in rates would spook importers. China-to-US West Coast rates are $600 higher than the same period in 2019. But they are also 66 per cent lower than last August.
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Coming down from the highs of last year, "$2,000 a day now shouldn't scare the hell out of them," Mr Sand said.
Home Depot CEO Edward Decker said on an earnings call that cost increases in transportation, products and commodities had "all completely abated."
John Mulligan, chief operating officer at Target, said on an earnings conference call that the retailer is seeing much more favourable conditions across its supply chain, especially in ocean shipping.
Importers and some shipping industry specialists expect the recent run-up in spot rates will be short lived. US container import volumes remain behind year-earlier levels while some ocean carriers are starting to take delivery of new containerships they ordered when demand was at its peak, pouring extra capacity into a lacklustre market.
Deliveries of new containerships added the equivalent of 1.2 million containers of capacity during the first seven months of 2023, a record, according to Denmark-based shipping trade body Bimco.
Ocean carriers such as Denmark-based AP Moller-Maersk have reduced supply by pulling some containerships from service and slowing their vessels, effectively eating up capacity. But even more containerships are expected to enter service over the next year, said Philip Damas, managing director of the Drewry Shipping Consultants group.
"There is a tide of overcapacity that will definitely affect global shipping, so we will see spot rates resuming their downwards trend" in the fall, Damas said. |
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