Business Costs

Bargains Aplenty for Ocean Shippers

Underutilized container-cargo ships are begging for business.

By Jim Ostroff, Associate Editor, The Kiplinger Letter

October 7, 2010

Good deals on ocean container-cargo rates are available to importers and exporters now through early March for goods shipped on a spot basis.

Rates will be about 10%-20% lower than what was charged this past summer. Shippers with expiring longer-term contracts can also negotiate lower rates now.

Why? An earlier-than-usual end to the peak season demand that usually runs from July through early October. Ocean carriers -- socked by last year’s deep recession -- assumed that demand was roaring back when orders piled up in spring and continued rising into July.

Figuring that they were in the catbird seat, carriers hiked rates 50% and, in some cases, even 100% from last fall’s depressed levels. But the rush of orders turned out to be a temporary phenomenon as U.S. companies stepped up purchasing to replenish inventories that were drawn down to the bone during last year’s weaker economy.

The subsequent order slowdown caught many ocean carriers by surprise. Demand for shipping plunged while they were still bringing vessels out of dry dock. By late summer, carriers were again saddled with an inordinate amount of excess shipping capacity, spelling a buyer’s market for ocean shipping services.

Rates will firm by spring with the advent of the next peak shipping season and as the economy picks up steam. Still, rates for container cargo won’t rise much above 5% in 2011, compared with around a 10% increase this year.

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