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After a year of service deterioration, regulatory threats, and complaints from retailers as prices soared, container prices may stabilize.

According to the World Container Index of London Maritime Research Company Drewry, which tracks east-west routes, the cost of a 40-foot container dropped slightly from US$10,377 the previous week to US$10,360 last week, a decrease of 0.2%. Due to high demand and congested ports in the United States restricting ship capacity, the price is three times the price a year ago.

Simon Heaney, senior manager of Drewry Container Research, said that the average spot freight rate has stabilized in the past two weeks because the two major container shipping companies Hapag-Lloyd and CMA CGM announced in September that they would Increase them sharply for 22 consecutive weeks. "We believe that other lines are also doing similar things, but it is not official," Heini said.

CMA CGM's spot interest rate cap will expire on February 1, 2022, and Hapag-Lloyd does not set a fixed date.

Hapag-Lloyd stated that they are freezing interest rates because they have reached a peak, while CMA CGM stated that it is prioritizing long-term relationships with customers in light of "unprecedented conditions in the shipping industry."

Heaney pointed out that shipping companies "under great pressure from shippers and regulators" to control freight rates. To freeze the spot exchange rate at such a high level, "this is a relatively cheap gift," Heini said. "Some shippers ask why now, why not go further?"

Shippers-importers and retailers who paid to load their products on container ships-expressed anger at what they saw as shipping companies "raising prices", which had achieved unprecedented record profits during the recession. . A CEO of a Philadelphia home improvement company filed a complaint with the Federal Maritime Commission, the US agency’s mission to ensure that the marine supply chain is competitive and fair. In an interview with The Loadstar, a supply chain trading agency, he called the shipping companies' high rates and low services "outrageous behavior" that would "reverberate throughout the U.S. economy" and accused them of operating cartels. 

James Hookham, director of the Global Shippers Forum, reacted to CMA CGM’s statement. He told The Loadstar: “It’s like a tormentor asking a prisoner,'Aren’t you grateful that I stopped turning the screws on the shelf?”

The historically high interest rates have attracted the attention of the Biden administration, which issued an executive order in July indicating that regulators are paying attention to non-competitive behavior in the industry. According to the Washington Post, “The White House official who drafted the Biden order stated that the high freight rates caused by the lack of competition are a drag on the entire economy.” Aides acknowledged that the pandemic caused most of the disruption, “but they said there was a lack of competition. Enable freight companies and railroads to take advantage of the pandemic by pushing prices to historical highs."

Companies compete for the limited space on the world's container ships to push up transportation costs. Heaney said that although the chaotic supply chain has increased some operating costs, operators "make more money than ever before," and revenue far exceeds rising costs.  

This has brought extraordinary profits to the shipping company. Maersk, the world's largest container shipping company headquartered in Copenhagen, announced in its August financial report that its net profit for the second quarter of 2021 was US$3.7 billion, an eight-fold increase from the same period last year, citing "special ocean conditions." Hapag-Lloyd’s revenue increased by 51% in the first half of 2021, with a profit of US$3.3 billion. CMA CGM also announced a record profit of US$3.5 billion, an increase of 2,500% over the same period last year.

This has had a significant impact on small and medium-sized retailers, who accumulate a large portion of manufactured goods traveling to and from Asia and the United States, but their personal annual sales may only occupy a few containers each year. These smaller companies are at a disadvantage and cannot compete in quantity or capital.

Many people withdrew from the market because of overpriced, and watched their inventory dwindle just before the most important Christmas, while their goods were put in a container in Shanghai. Nothing can get them on board in time like a miracle.

Nathan Strang, senior manager of shipping operations, said that even if container space can be secured, retailers that sell low-value products (such as squeaky cat toys) at meager profits "may be sad now." San Francisco-based freight forwarder Flexport. The price of transporting a container may exceed the profit they get from the contents.

Large retailers such as Costco, Wal-Mart, Home Depot and Target have taken extreme measures to ensure that their goods arrive on time. They rented their own dedicated ship-an expensive and unusual move-and locked in a premium of more than $20,000 to guarantee that their containers would be loaded on the ship or shipped in June for Christmas, paying Months of warehouse storage costs.

Flexport's Strang said that the relief from rising prices does not guarantee that this trend will continue in 2022. The low inventory of retailers across the United States means that they will have to continue to ship goods to replenish them after the peak Christmas season. A further drop in prices may prompt more retailers to resume shipments, thereby pushing up prices again.

A different kind of subversion may be coming. Last week, China’s power rationing forced the temporary closure of its industrial manufacturing centers, and some shippers and freight forwarders in Asia reported falling container rates. China-based Caixin Global reported that due to a drop in supply due to power outages, an executive of a Shanghai freight company believed that container freight from China to the west coast of the United States was almost halved, from US$15,000 to US$8,000.

Simon Hine of Drewry said that it is too early to judge whether the Asian manufacturing slowdown will affect overall container prices. It remains to be seen how long the rotating power outages will last, and the extent to which they will affect the ability of Chinese factories to continue to produce goods for the United States. "Until then, I can't really give you a confident assessment," Heini said. But if this does happen, Heini added, it may force a slowdown in U.S. demand. This will allow shipping, ports, rail, and trucking to resume and begin to restore normal operating supply chains-which will reduce freight prices.

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