SHIPPING CHARGES STARTING TO EASE
Byline: Scott Malone
NEW YORK — The slowing U.S. economy is bringing apparel importers lower shipping costs.
For the past four years, steamship companies have hiked their base rates for transporting goods from Asia to North America, tacked on surcharges for peak-month shipments of goods destined for holiday sales and passed along their rising fuel costs.
The warnings that price hikes were on the way have trickled out each fall, as companies prepared to negotiate yearly contracts that have traditionally started in May. That is a relic of the years before 1999, when the rates ocean carriers charged had to be publicly posted, allowing shippers big and small to know what others paid.
The trend continued through last fall, when the Transpacific Stabilization Agreement, a discussion group of steamship companies, announced it would recommend that its members seek another rate increase of $525 per standard 40-foot container.
However, as the economy began to cool during last year’s holiday shopping season, retailers and apparel vendors cut back on orders to tighten inventories. That made it much harder for ocean carriers to push the hike through.
In a statement on its Web site, the American Import Shippers Association, a New Rochelle, N.Y.-based organization of small and midsized apparel and textile importers, said it was able to hold off this year’s rate hikes for its members.
“The rate recovery program announced by the Transpacific Stabilization Agreement earlier…faced stiff opposition from shippers and was more or less abandoned by the carriers during the second part of April,” the statement said. “In fact, the AISA was able to negotiate rate reductions in all our contracts.”
Since then, many carriers have had to further reduce their rates in the face of falling demand. That has caused them to give up most of the price hikes they had imposed over the past few years, according to a spokesman for the San Francisco-based TSA.
“Definitely, rates have been declining,” he said. Of the price increases of the past few years, he added, “That’s pretty much all been eroded. We’re actually back to a point slightly below where we had been.”
Overall rates have declined around $1,000 per container over the past few months, according to industry estimates.
While cargo ships traveling from Asia to North America have been running close to full, he acknowledged that the uncertainty about consumer demand following last month’s terrorist attacks and ongoing threats makes it hard to predict how well cargo traffic will hold up.
“There was a sense, even before Sept. 11, that it was going to be a short season and that exactly what holiday consumer demand was going to look like was very uncertain,” he said. “Now it’s even more so.”
In light of that uncertainty, the group — for the first time in five years — plans to make no recommendation this fall to its members regarding prices.
“Right now, it’s really premature for the alliance to be doing anything about announcing anything on rates,” he said. “They have been meeting…and they are going to be looking very closely at the market.”
The current economic slowdown is not the group’s only reason not to propose rate hikes this fall. Deregulation has also made it unnecessary and unwise to announce pricing actions months in advance of renegotiating contracts, the TSA spokesman noted.
“The experience of the last couple of years was when the lines announced in October, the market had changed radically by the following year,” he said. “Now, the economy is a lot less predictable. It is not going to happen the way that it had in the past.”
While demand is keeping prices down, there is another risk that could raise the cost of importing. Should the U.S. war on terrorism, now focused militarily on landlocked Afghanistan, develop into a naval conflict, ocean carriers will likely face higher insurance premiums, which they traditionally pass along to consumers.
Ed Emmett, president of the Arlington, Va.-based National Industrial Transportation League, said that, most recently, war charges have been an issue on shipments coming out of Sri Lanka, because pirates had been working the area.
“Carriers have passed those on, though all haven’t done it evenly,” he said. “We caught one who didn’t even serve Sri Lanka that was trying to add it on. The shippers have to pay attention to what is going on there.”