By Noah Rothstein
Long waits for merchandise deliveries and sky-high costs are hobbling the efforts of small and midsize businesses across the U.S. to recover after a challenging year.
With retail giants like Walmart and Amazon rushing to restock to meet booming demand from U.S. consumers, smaller competitors are fighting over dwindling cargo space on boxships coming in from Asia. Those who want immediate shipments must often pay about three times the going freight cost, according to brokers and cargo owners.
Shipping delays and high freight rates are among several challenges facing American businesses. Many are also dealing with rising costs for products and a shortage of available labor. These factors weigh heavily on small businesses, which tend to have fewer resources to absorb price increases and less leverage to negotiate lower rates.
The situation is not expected to improve in the near term. Container ship operators said retailers started booking cargo space for year-end holiday merchandise in June, three months before the start of the traditional peak shipping season.
“We don’t see demand going down at all,” said Narin Phol, managing director for North America of Danish shipping giant Maersk, the world’s biggest boxship operator. “Everybody is concerned about the peak season.”
The average price to ship a container from China to California is now at $6,043, up 43% since the start of this year and 344% since the start of 2020, according to the Freightos Baltic Index. The price for a box from Asia to Europe is $13,073, up 130% from the beginning of the year.
Small U.S. importers said they are paying much more to get goods on ships.
“It’s a big challenge to find a ship,” said Eram Siddiqui, the owner of New York-based Hudson + Bleecker, which sells travel bags and accessories. “Pre-pandemic, we brought in our containers for $3,500 to $4,500, and the waiting time to sail was 10 days,” she said. “That container now is $17,000, and it won’t move until September.”
Shipping executives said rising freight costs resulted from disruptions across supply chains that triggered delays at ports and inland distribution networks. Rates started climbing at the end of last summer as homebound Americans began ordering an unprecedented amount of online goods like furniture, exercise equipment, and electronics.
Freight price increases accelerated due to a blockage in the Suez Canal in March and congestion at the Southern California gateways of Los Angeles and Long Beach and China’s Yantian port.
According to shipping research group Sea-Intelligence ApS, some 700 ships were more than one week late in arriving at West Coast ports during the first five months of 2021, compared with a combined total of 1,500 from 2012 to 2020.
In an executive order signed on July 9, the Biden administration said it would push regulators to confront perceived anticompetitive pricing in the ocean shipping and railroad industries as part of an effort to blunt the power of big business to dominate industries.
The administration will ask the Federal Maritime Commission to combat what it calls a pattern of consolidation that stifles competition and allows aggressive freight pricing. The administration said mergers among big shipping players had enabled them to charge unreasonable fees.
Federal Maritime Commission (FMC) Chairman Dan Maffei said the commission’s powers were limited without proof of foul play. He said Congress should consider giving the commission greater regulatory powers if it wants its authority to extend beyond the intentional manipulation of rates.
