Changes in demand for global freight logistics
Posted by David Ige on Fri, Jun 04, 2010 @ 04:05 PM
...Can an Importer from Shreveport, Louisiana Partner with an Exporter in Louisville, Kentucky?
Changes in demand for global freight logistics have opened new opportunities for collaboration. It doesn’t take an expert on global trade or economics to see that America is beginning to export more and import less. This is good news for American business, but does present some unprecedented challenges in moving goods overseas.
“...carriers don’t like to move cargo inland as they want their containers in the ports to save the cost of repositioning.” - Devin Burke, CEO, Universal Cargo Management, Inc.
Although most of the growth in shipping traffic is still bulk items, such as scrap, produce, lumber, rawhide, cotton, etc, this country is growing in exports of such items such as used vehicles, construction equipment, as well as new manufactured goods such as building materials, medical equipment, sporting goods, high endfurniture. You couple that fact with the weak dollar, an Obama administration pushing to “double our nation’s exports in 5 years”, a growing middle class Chinese population developing an acquired taste for goods “made in America”, and other aggressive trade policies between America and countries like South Africa and Australia you would have to see there is a growing trend in exports. So what we are experiencing on the logistics side of exports are a steady increase in space and equipment shortages for anything being shipped out of America. Therefore if you are an exporter you not only face a space problem, where you may have to wait 3-6 weeks to get on board a vessel, depending upon the port,you are also experiencing shortages of actual equipment, especially in interior cities. So you may have to wait 2-3 weeks before equipment arrives before the carrier will accept booking.
On the import side, while there has been a decline in volume because of the decline in the American consumer’s buying power, retail decline, weak dollar, unemployment and other factors that severely slowed down the amount of cargo coming into this country from Asia in the past 2 years, there exists strangely enough since the 4th quarter of last year a severe space problem on ocean freight carriers from Asia, especially China.
The Big Disconnect: Import / Export Challenges
Now most of us all know the cause of this space problem to be manipulated by the carriers themselves when they decided to dock many of their vessels in ports like Singapore.(If you fly into Singapore you will see an ocean of between 6-700vessels sitting there empty, it’s quite a sight). This was done to “save” the lives of carriers because of the billions they lost last year (I heard Maersk lost $2 bill, wow, they supposedly have never lost money, ever, but who knows with creative accounting what the truth is, but still, wow). Well this capacity constraint actually worked for the carriers, as if you are an importer you will know the freight rate shave gone up from $700/40 from China to the west coast during the summer of’09, to now most importers are looking at paying around $2500/40 this summer. But even with the increase in revenue for the carriers, they are cleverly withholding their vessels in order to continue the space crunch, so they can maintain their high ocean freight rates for inbound freight to the USA.
The Federal Maritime Commission is investigating this matter and urges anyone wishing to participate in these hearings or offer information relevant to the development of the record in this proceeding to contact her office at (202) 523-5715.
So, What Are We Looking At?
We have a shortage of equipment for exports, and a shortage of space because of too many containers coming into America ? So why the disconnect ? One obvious answer is the fact the carriers don’t like to move cargo inland as they want their containers in the ports to save the cost of repositioning. However if an importer in say, Shreveport , Louisiana cannot get space for cargo coming from Shanghai and now has to pay freight somewhere in the range of $4500 or more (up about$1300-1500 from a year ago) uses a carrier like Maersk, or MSC that also has an exporter customer in a nearby town in Northern Louisiana of lumber, waste paper,or cotton who cannot get equipment and space for their exports for 3-4 weeks, why doesn’t MSC or Maersk put these two needs together to solve each others' problem? It would seem to me that either the people running these carriers are too shortsighted, or maybe the cargo moving out of this country is just too far away and costly to match with the destinations of imported cargo, I don’t know for sure, but I would bet on the former.
Bottom Line
In the past, carriers essentially subsidized the inland distribution of containers; now, with some homework on the part of American businesses, collaboration with May 22, 2010 to save container distribution costs can be leveraged in negotiating for space on outbound ships.Universal Cargo Management, Inc. has over 25 years experience assisting customers and partners in freight logistics internationally and domestically.