Exporters bemoan lack of capacity
U.S. exporters are being hurt by a shortage of vessel space to carry their goods, and there is also concern about carriers' increased use of slow steaming on outbound legs.
'Currently and for the foreseeable future, the ability of U.S. exporters to meet the demand of their customers will be constrained by the lack of ocean carrier capacity,” said Peter Friedmann, executive director of the Agriculture Transportation Coalition (AgTC) whose members ship everything from cotton to nuts, frozen poultry to wine.
Last week, about 35 AgTC members met in San Francisco with the 10 member carriers of the Westbound Transpacific Stabilization Agreement, which move cargo from the United States to Asia.
'The focus of the meeting was how do we get additional capacity in the trade to support U.S. exports, which are currently stymied by the lack of capacity,' he said.
Hayden Swofford, executive director of the Pacific Northwest Asia Shippers Association, said, 'we are facing a crisis point of equipment availability and space issues, and they are distinctly coupled.'
Exporters' challenges getting room on ships or containers to stow cargo are similar to those shippers faced several years ago. But then the difficulty largely was by some container carriers deciding to stop serving some inland points where export cargo originates.
Swofford, whose members are from the forest product industry, said this time the crux of the problem is carriers reducing capacity because of the slowdown in the world economy.
'I'm in the Northwest and right at this point about 46 percent of the available tonnage compared to this point last year is gone,' he said.
Peter Gatti, executive vice president of the National Industrial Transportation League, said the dollar's drop in the value has made U.S. exports more attractive, 'but the problem the shipper has is meeting that demand because the inbound cargo have not brought sufficient cargo to meet the outbound demand.'
'As was pointed out in the meeting in San Francisco last week, if U.S. exporters cannot get loaded, the foreign buyers are already shifting to other sources, and they won’t necessarily come back if and when export capacity increases,' Friedmann said.
He said shippers are having cargo rolled from one week to another, and in some cases are having to turn down sales because they know they may not be able to get cargo on a ship for two months.
Friedmann said that if a shipper can get its cargo to Los Angeles- Long Beach or New York, it will be able to find capacity on ships for export cargo. He lauded a visit by representatives from the Port of Long Beach who came to the AgTC meeting to see if there were ways they could assist exporters.
Long Beach 'is asking: 'what do ag exporters need to ship more cargo through Port of Long Beach?' Our members are now compiling a specific list of items to be shared with the senior professional staff at the port this week,' he said.
But the extra cost of getting cargo to Los Angeles-Long Beach or New York 'eliminates the entirely the margin' for some agricultural goods and makes overseas sales impossible, he explained.
Friedman said during the five-hour meeting, the AgTC found carrier projections for export sales were 'way off base and we are going to provide the carriers with better export volume data. They are not going to put ships in the trade if they think cargo volumes are declining. Exports are increasing.'
'It was clear that the carriers are basing their capacity planning on what we believe to be very bad economic forecasts. For example, WTSA is forecasting a 7 percent decline in U.S. exports, which generated a collective gasp from our AgTC attendees, who believe that true forecast is exactly the opposite — a significant, even possibly double-digit increase in export sales.
'A lot of sales are being left on the table because companies can't make commitments to foreign buyers for delivery of cargo if it is eight weeks out before you can make a booking. So the foreign buyer goes somewhere else,' he said.
Friedmann said the AgTC plans to meet with the WTSA for another closed-door dialogue in June. He said he was “greatly encouraged that both the carriers and port are reaching out to the ag export community. If we are going to get out of this recession, it’s going to have to be by exporting, but we won’t be able to do so without sufficient capacity.”
He added, 'I think it is almost universal that exporters would be willing to pay more if they were able to get a container and get on a ship within two weeks on a ship.'
Friedmann said shippers also feel carriers need to have a better understanding of how exports are priced. He said some carriers only give shippers only one month's notice before a general rate increases, when exporters have made sales three or four months out.
'Carriers need to understand the GRIs or surcharges imposed in the interim are coming out of the hide of the U.S. exporter, the foreign purchaser has a locked-in price. The exporter not only can lose profit, but can lose money on the sale. Carriers need to get closer to their customer,' he said.
Friedmann also said there was concern about increased use of slow steaming.
'Unless they put more ships in the trade, it just means there are more containers on the boats longer, and not available for loading here, it exacerbates the shortage,' he said. 'It also is not slow steaming on the round trip, it's slow steaming on the export side. So the savings to the carrier comes at the expense of U.S. exports. The beneficiaries are the Chinese manufacturers.' ' Chris Dupin