"Shipping chaos gives top importers ‘massive competitive edge’"
When I first glanced at this story I thought I had already read it and moved on to something else.
But then I realized what I had read was via FT Alphaville the day before this piece was published:
Thursday, August 26, 2021 Shipping: Which Shippers Are Hit Hardest By Exploding Costs? Because our readers are smart, funny, and good looking they are a step or two ahead of me on the headline question. Of course it's the Malaysian or Singaporean exporter who only sends out one 40 ft. box per month. Read on for details.
From the FT's Claire Jones at FT Alphaville, August 26:
Who’s really feeling the shipping cost squeeze?
The bulk of the burden is falling on smaller customers as shipping freight rates decommoditise.
So today I was tempted to go with the alternative headline "That Time the Editor of the FT's "Trade Secrets" Newsletter, Claire Jones Beat the Specialist Shipping Publication To the Story" but beyond being quite wordy (borderline Daily Mail) it would be just plain rude toward FreightWaves (not to mention ungrateful), a site we like and have linked to for years.
Besides, Claire and FreightWaves' Senior Editor Greg Miller add their own individual approaches, foci, and emphasis to the story, teasing out different factoids and conclusions. So without further ado, from Greg Miller at FreightWaves, August 27:
The Asia-U.S. container market is now in a class by itself, with the
trans-Pacific eastbound trade pricing differently than any other route
in the world.
The largest importers are paying far lower freight rates than smaller
importers, the playing field is becoming increasingly uneven, and
foreign ocean carriers are in position to pick the American import
sector’s winners and losers.
“We’re seeing a price differential of $15,000 [per forty-foot
equivalent unit or FEU] between the lowest short-term price in the
[trans-Pacific] market and the top price,” said Erik Devetak, chief
product and data officer of Xeneta, a Norwegian company that analyzes
freight rates, during a press conference on Thursday.
“That implies a huge competitive advantage for established players,
which has consequences across the economy and for everyday life, and
also, from a point of view of lowering competition and increasing
barriers to entry for future competitors.”
Patrik Berglund, CEO of Xeneta, added, “Everybody’s seeing price
increases but … being really big is really a massive competitive edge in
this market.”
Berglund warned, “When I think about the smaller mom-and-pop
importers and exporters, I’m really concerned that if this lasts, the
big players can eat even more market share simply because the
infrastructure now is so tilted in favor of the big players.”
Origins and destinations matter a lot more According to Devetak and Berglund, the trans-Pacific is no longer a single shipping market with a single “right price.” Rather, the vast spread between the high and low price has allowed carriers to splinter the trans-Pacific into multiple market layers. This explains why different container indexes are showing vastly different spot rates for the trans-Pacific.
“There is a whole series of different markets now for different situations and different import parameters,” explained Devetak.
$/FEU (Chart: Xeneta)
Port of origin has become one key parameter. “Historically, when we
think of a single trans-Pacific market, if you go back a year, or a year
and a half to pre-corona, the price differential between shipments
originating in China, Taiwan, Japan or Singapore [to the west coast] was
small — $100, $150, $250 [per FEU] max — on the order of 5-10% of the
market rate,” said Devetak....
