Shippers have become accustomed to seeing space on container ships in the Transpacific trade fill up during the traditional peak shipping season, but the current Asia to U.S. market is experiencing something much more than a traditional peak season. The majority of the space on ships is already sold out for the entire month of August. No one could have predicted the severity that the current space shortage is having on importers from Asia. The last time the Transpacific trade experienced this type of space crunch was in 2010.
Similar to 2010, the problem has been created by the decision of the carriers to drastically reduce capacity. All three major carrier alliances have announced capacity reductions targeting Asia to U.S. West Coast services. The combined reductions amount to over 21,000 TEUs a week that are no longer available for shippers to move cargo. The carriers are quick to say the cuts were necessary due to the spike in fuel costs and the threat of tariffs being imposed in the China to U.S. trade. The carriers claim that if the tariffs were fully implemented, demand would tank causing financial losses that would mirror 2016.
Anytime the carriers remove a significant amount of capacity from the trade, there are skeptics as to the real motivation behind it. The skeptics will claim the carriers are using the threat of tariffs to pull capacity in order to drive rates up. The carriers have been very successful if that was their true intent. Shippers hoping that capacity will be returned to the trade to ease the shortage are going to be disappointed. When the carriers take extreme measures in the industry, they are usually 100% united in their actions.
The next 8 weeks will be a major challenge for the shipping industry. Shippers that have not taken time to establish relationships with their service providers could find it very difficult to find space, regardless of how much they are willing to pay. Carriers expect the space issue to last at least through the month of September.
The International Housewares Shippers Association (IHSA) is a not-for-profit association formed to benefit companies belonging to the International Housewares Association (IHA). Through the combined leverage of members, IHSA negotiates freight contracts and partners with other logistics providers to lower supply chain costs.
IHSA’s main function is to negotiate the lowest possible transportation rates and provide the highest quality service for all participating members. Additionally, IHSA members receive valuable market intelligence and advice through regular newsletters and briefings.
IHA member companies looking to reduce their ocean freight costs or have questions about an ocean freight issue are encouraged to contact IHSA to learn about the program. Contact IHSA at +1-513-489-4743 and learn more on our website.