Volatile Ocean Freight Rates Could Climb Again This Year
Heath E Combs -- Furniture Today, July 13, 2011
Furniture/Today Editor in Chief Ray Allegrezza, left, questions ocean freight panelists Chad Rosenberg, American Global Logistics; Steve Wolfe, Stanley Furniture; Steve Burdette, Havertys Furniture; and John Lomax, Furniture Brands International.
ATLANTA - Suppliers' wants are pretty simple when it comes to the ideal environment for importing, according to Steve Wolfe, Stanley Furniture's vice president of global supply chain and logistics: A competitive freight rate and stability throughout the supply chain.
Wolfe, who was among those on an ocean freight pricing panel at the 2011 Sandow Media Logistics Conference, said those conditions have been elusive in the past few years.
Panelists said the top issue in ocean freight for at least 18 months has been a lack of stability, with volatility as shipping carriers altered pricing and capacity.
Chad Rosenberg, CEO at American Global Logistics, whose services include container handling and multivendor consolidation, said the volatility stemmed from 2008 when 1.5 million TEUs, or 20-foot equivalent containers, were brought online.
Those containers were ordered in 2004 and 2005, before the housing bust, but added a tremendous amount of capacity, resulting in an oversupply that caused freight rates to plummet in 2008 and 2009 with the onset of the recession.
In 2009, ocean freight carriers decided to cut capacity by about 1.9 million TEUs, creating a shortage of supply in the second half of 2009 and into 2010 - the likes of which the industry had never seen before. Shipping carriers pushed up freight rates.
Since about the third quarter of 2010 rates have come back down, with shipments to West Coast ports costing almost 40% less than at their peak. But costs could start climbing again in the second half of this year, panelists said.
Rosenberg said carriers in fourth quarter of 2010 were at 13% profit margin, but by the first quarter of 2011 were at a negative 1% margin. That means steamship lines could cut capacity again in the second half of this year to ward off losses.
John Lomax, director of transportation at Furniture.
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