Container situation poses challenges for industry
Thomas Russell, Associate editor -- Furniture Today, March 1, 2010
On the surface, recent news from the National Retail Federation appears to bode well for this year's economy. An analysis the NRF did with Hackett Associates predicts that container traffic at major ports will be up 25% in the first half of 2010.
This projection is based in part on year-over-year gains in the flow of containers of 2.6% in December, an estimated 17% in January and an expected 30% in February.
That kind of growth in container traffic implies that retailers are restocking after a lackluster 2009. At recent furniture markets, we've heard about this happening. Inventories have been down for so long they almost have nowhere to go but up.
But if you can believe it, there's also a downside to this container shipping boom. That's because it's coming during one of the worst capacity shortages in memory among the major shipping lines, including those shipping goods from Asia.
As we reported in our Feb. 22 edition, this has caused many containers of home furnishings to get bumped in favor of containers shipped by importers willing to pay higher prices for the space. This, in turn, could result in delays in those goods getting to the United States.
In a Jan. 26 letter to its clients, third-party logistics provider Globe Express Services said the tight vessel capacity from Asia to North America was expected to continue and even intensify over the next 30 to 60 days. It attributed this to several factors, including winter capacity reductions of over 50% on some carriers; an abnormal surge of bookings to avoid a Jan. 15 rate increase; the desire to get goods out before Chinese New Year in mid-February; and an overall spike in orders aimed at replenishing inventories.
To alleviate the situation, Global asked clients to book shipments as much in advance as possible, prioritize bookings and consider paying a premium of $500 to $1,000 per container to get the goods moving. Unfortunately, not even these types of steps have gotten goods shipped in a timely manner. Some of our sources claim they have still gotten their containers bumped by higher-paying customers.
Now that Chinese New Year has come and gone, the question is whether the situation will improve. Many are doubtful, based on the pileup of containers they have seen at the ports in recent weeks.
Thus, the increase in container shipments is a mixed blessing. While it means retailers are resuming order activity, it also means they and their customers may have to wait longer to get the goods. Hopefully for our industry and others, it won't dampen the consumer's appetites and stall the recovery we've all been so eager to experience.
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