Pandemic affects freight costs in maritime transport

Rate control and capacity of ocean carriers hang in the balance


Rising freight rates and delays in cargo deliveries have resulted in a global backlash of companies expressing dissatisfaction with deteriorating service and rising shipping costs.

China’s trade associations have suggested to the government their concerns about antitrust practices, while similar pressure is developing in Brussels, where the European Shippers’ Council has called on the European Commission to address “outrageous price hikes” by freight forwarders.

In Washington, the largest retailer lobby group wants authorities to examine the significant increase in these prices.

In the U.S., the cost issue is intensifying as port congestion and container shortages on major transpacific routes add to delays and lost business for exporters.

Some retail chains and manufacturers, which depend on international supply lines, are forced to cut other expenses or completely rethink their strategies.

U.S. companies such as Colgate-Palmolive or Boot Barn Holdings, joined by another from Europe and Asia have highlighted supply tensions in recent days. The Federal Maritime Commission launched an investigation late last year into port congestion, but the slow phase persists in the supply chain ahead of the seasonal peak before Chinese New Year in mid-February.

“Our freight costs will probably be a pressure point for us over the next, I don’t know, three to six months,” Greg Hackman, chief operating officer of California-based Boot Barn, said last week, citing port bottlenecks that are affecting inventories.

With business already hit by the pandemic, the logistical problems may be too much for some companies. That’s how blunt Stefan Pierer, CEO of Pierer Mobility AG, the Austrian motorcycle manufacturer KTM, was.

German manufacturers warned this week that shortages of raw materials and shipping containers have led to rising costs and shrinking inventories.

Non-Existence of Inactive Vessels

Hapag-Lloyd AG, Germany’s largest carrier, said this week it is working on a “schedule recovery plan to return vessels to their scheduled positions,” a move that may mean some routes will have no sailings for a week or two.

“Vessels will not be idle at any time,” CEO Rolf Habben Jansen said Monday in an e-mail to customers. “Let me assure you: all our vessels are sailing, and if we can find additional capacity we will secure it, but the market for charter vessels is at the moment basically sold out.”

The European Commission is in talks with shippers, freight forwarders, port operators and carriers, but at the moment has not launched any formal investigation into anti-competitive behavior. It says there are many factors that could be causing the price hikes, such as demand and port congestion.

Source Bloomberg

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