Shipping container prices may be leveling off after a year of worsening service, threats of regulation, and complaints from retailers as prices skyrocketed, reports Quartz.
Container prices climbs 3 times higher
The cost of a 40-foot container declined modestly from $10,377 the previous week to 10,360 last week, or 0.2%, according to the World Container Index by Drewry, a London-based maritime research firm that tracks East-West routes.
The rate is triple the price compared to a year prior thanks to high demand in the US and congested ports tying up ship capacity.
Simon Heaney, the senior manager for container research at Drewry, says average spot rates have plateaued over the last two weeks because carriers, notably Hapag-Lloyd and CMA CGM, two major container lines, announced in September that they would be freezing rate increases after steeply raising them for 22 straight weeks. “We believe other lines are doing similar, but unofficially,” Heaney said.
The spot rate cap by CMA CGM is set to expire in February 1, 2022, while Hapag-Lloyd did not set a fixed date.
Unprecedented situation in the shipping industry
Hapag-Lloyd said they froze rates because they had hit their peak, while CMA CGM said it was prioritizing its long-term relationship with customers given the “unprecedented situation in the shipping industry.”
Heaney noted that shipping lines “are under significant pressure from shippers and regulators,” to rein in their rates. Freezing the spot rates at such a high level, “this is a relatively cheap giveaway,” Heaney said. “Some shippers are asking why now and why not go further?”
Shippers—the importers and retailers who pay to put their products on container ships—have expressed anger at what they saw as “price-gouging” from shipping lines reaping record profits unheard of in leaner times. One CEO of a Philadelphia home décor firm, filed a complaint with the Federal Maritime Commission, the US agency tasked with ensuring that the ocean supply chain is competitive and equitable.
High rates and low service
In an interview with The Loadstar, a supply chain trade outlet, he called the high rates and low service, “outrageous conduct,” on the part of the shipping lines, that would “reverberate throughout the US economy,” and accused them of operating a cartel.
James Hookham, a director at the Global Shippers’ Forum, reacting to CMA CGM’s announcement, told The Loadstar: “It’s like the torturer asking the prisoner ‘aren’t you grateful I’m not turning the screw on the rack any further?’”
The historically high rates have drawn the attention of the Biden Administration, which issued an executive order in July indicating that regulators are watching the industry for non-competitive behavior.
According to reporting in the Washington Post, “The White House officials who drafted Biden’s order say high freight costs, resulting from a lack of competition, are an economywide drag.”
The aides acknowledge that the pandemic caused much of the disruption, “But they say the lack of competition enabled cargo carriers and railroads to exploit the pandemic by driving prices to historic highs.”
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Source: Quartz
