- Large US retailers charter ships amid supply crunch
- Dozens of Container Ships Stuck at US West Coast Ports
- Companies dependent on Asia’s supplies face tough holiday season
- Shipping operators can take advantage of hike in container rates
LOS ANGELES, Oct 7 (Businesshala) – Flying buttresses once glide across oceans carrying important items like grain to all corners of the globe.
Now it holds a different treasure: Pt Patrol Movie Towers, Batmobile Transformers and Baby Alive Lulu Achu dolls.
The dry bulk cargo ship is designed in service of retail giant Walmart (WMT.N), which is chartering its own vessels in an effort to beat global supply chain disruptions, which are the make-or-breaks of the retail industry. -Brake threatens to torpedo Vacation. Season.
“Chartering ships is just one example of the investment we’ve made to move products as quickly as possible,” said Joe Metzger, U.S. executive vice president of supply-chain operations at Walmart, which has leased multiple ships this year.
It aims to bypass log-jammed ports and secure scarce ship space at a time when COVID-19, as well as US-China trade conflicts, equipment shortages and extreme weather, have caused the fragility of supply lines across the world. exposed which we use. For everything from food and fashion to drinks and diapers.
According to the Marine Exchange of Southern California, more than 60 container ships carrying billions of dollars worth of clothing, furniture and electronics are stuck outside the Los Angeles and Long Beach terminals.
Pre-pandemic, it was unusual for more than one ship to be in the waiting lane at the No. 1 US port complex, which handles more than half of all US imports.
Other big retail players such as Target (TGT.N), Home Depot (HD.N), Costco (COST.O) and Dollar Tree (DLTR.O) have said they are leasing ships to deal with the pandemic. Huh. The slowdown of the maritime network that handles 90% of the world’s trade.
Or, as Steve Ferreira of shipping consultancy Ocean Audit describes the growing concern: “containerageddon.”
The resurgence of COVID-19 in countries such as Vietnam and Indonesia, as well as power supply shortages in China, is freezing the traditional lifelines of US retailers from Asia. The supply disruption coincides with rising demand as consumers spend more on goods than they go out, and the festive shopping frenzy is near.
Bert Flickinger, managing director of retail consultancy Strategic Resource Group, said at least 20-25% of goods stuck on ships were unlikely to make it on shelves in time for Black Friday, November 26, the holiday shopping season. , a period when retailers make more than a third of their profit.
path to great profit
The biggest chains are taking matters into their own hands.
In a typical year, Walmart would have transported those toys from China to Los Angeles in hundreds of 40-foot (12-meter) cargo boxes, stacked like colorful Lego bricks on giant container ships serving multiple customers. Huh.
But 2021 is far from normal. Cargo arriving at the Port of Los Angeles is up 30% from last year’s record level. The port’s executive director, Jean Cerocca, reflected the increase in consumer demand, saying that trucks and trains could not clear it fast enough, causing traffic jams.
“It’s like taking 10 lanes of freeway traffic and squeezing them into five,” Serocca said.
Chartered ships that offer valuable cargo space and can bypass container terminals play an important role in this second pandemic holiday season, especially for time-sensitive goods like Christmas sweaters that are too late. Will not sell upon arrival.
For example, Flying Buttress entered the waters of Los Angeles on August 21. According to Refinitiv, it got stuck in a queue outside the port before bypassing closed terminals and unloading its cargo at the separately operated bulk cargo dock on August 31. data and shipping records.
During that journey, Walmart switched to larger 53-foot containers, eliminating the shortage of 40-foot containers commonly used for global shipping, which almost exclusively sold goods by truck and train within the United States. are used for carrying.
Other companies are also playing the shipping game, including Home Depot, which said it was “working creatively to get additional capacity”.
The home improvement retailer dodged Los Angeles gridlock by shipping its Great Profit charter ship to the port of San Diego, about 125 miles south.
On September 15, the ship’s onboard crane hoisted 7-foot Halloween “spellcasting witches,” Christmas lights and other holiday decor onto the docks there, said Ocean Audit CEO Ferreira, which helps shipping customers refund overpayments.
“It’s the vibe of the house. They’re doing whatever it takes to win in a hot market,” he said of the retailers.
Why does port size matter?
Yet there is a limit to this type of functioning.
Great Profit operates at a terminal that handles everything from sugar to windmill blades, but can accommodate a maximum of 500 containers, from one to two vessels per month, said Greg Borose, the port’s head of maritime business development.
This is because San Diego, like many other US ports, does not have the huge gantry cranes needed to break boxes off large ships. The rail service is equipped for autos and other special cargo. And, roads have not been set up in surrounding commercial and residential areas for the fleet of trucks needed to haul thousands of containers to other parts of the country.
“If we had 3,000 (boxes) coming by ship, we would have a very unhappy community,” said Borose.
Not all retailers will hire ships to support sales, and other factors can be important in choosing potential winners and losers.
Jason Miller, associate professor of logistics at Michigan State University’s College of Business, said that as clothing and accessory retailers have seen their inventory decline, even as sales pick up, there is growing concern about the sell-off.
On the other hand, general merchandise retailers like Walmart and Target do a better job of maintaining inventory along with sales, he said.
Pay $20,000 per container
However, the global supply crisis is providing lucrative opportunities for bulk cargo ship operators; They are cashing in on a record spike in container shipping rates that have carried more than $20,000 per box of freight on the largest liner ships.
Global container shipping players, such as AP Moller Maersk (MAERSKb.CO) and Hapag Lloyd (HLAG.DE), are flush with cash from rising rates. Hapag Lloyd’s CEO Rolf Haben Jansen said “every ship we can find” has major lines.
Several shipping sources said other companies are dismantling older container ships of all sizes.
Hong Kong-based Taylor Maritime, which manages Flying Buttresses, according to the shipping database, did not respond to a request for comment.
Dry bulk transporters have little time to secure the cargo box safely and prepare the deck for carrying. They typically transport items in below-deck cargo holds.
Genco Shipping & Trading (GNK.N) is seeking approval from its ship safety certifiers to prepare some of its dry bulk vessels for carrying containers.
CEO John Wobensmith, who called the project “opportunistic,” said Genco isn’t going all-in on container shipping.
Separately, agribusiness giant Cargill [RIC:RIC:CARG.UL] Said said it is considering using some dry bulk vessels to hold containers instead, if only as a temporary solution, to “reduce bottlenecks”.