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Retailers and distributors in Europe and the US are outbidding each other to secure scarce cargo space on ships, The Australian reported.

They are paying up to double last year’s rates as they navigate through the peak shipping season for bringing in merchandise before Christmas, the report said.

The sharp increase in shipping rates is a result of the turmoil of last year, when carriers took 10% of the global fleet out of service and absorbed collective losses of $US20 billion (NZ$27 billion) as US and European retailers curtailed imports in the recession.

These problems have been heightened by an acute shortage of the 20ft to 40ft containers used to transport goods as the two Chinese manufacturers that control the market, CIMC and Singamas, closed their main factories last year. Production is resuming but there is a huge backlog of demand.

Mona Williams, vice-president for buying at Container Store, a US retail chain selling storage products, said her company was booking shipping space two weeks earlier than usual.

Jeffrey Siegel, chief executive of Lifetime Brands, a US company that designs and distributes kitchenware, said that his company was bringing merchandise into the country early to guard against delays.

“Usually we would have merchandise four weeks before the retailer wants it, but we have increased that to 90 days,” he said.

Steven Horton, of Horton Global Strategies, which negotiates freight contracts for companies, said that he was advising retailers to provide regular forecasts of their needs to shippers and to use a pool of five to six carriers, instead of the usual three to four.

Neil Dekker, of Drewry Shipping Consultants in London, said that the freight bills of most shippers had risen sharply this year. “The Hong Kong to Los Angeles spot rate for 40ft this week is $US2624 all in, compared to $US870 12 months ago,” he said.

Dekker added that although spot rates in the Asia to northern Europe market were still strong, at about $US1700 per 20ft, they appeared to be easing off as new capacity was added.

In contrast David Cheslin of Dunhelm PR, which works with freight and marine insurance clients, said that he expected shipping rates to remain high as carriers tried to make up for past losses.

“Faced with financial crises caused by over-investment in giant new ships, even the biggest operators have decided to hold out for compensatory rates. No one is breaking ranks because they cannot afford to do so.” Makoto Murayama, a senior shipping analyst at Nomura Securities, said there was an additional problem as shipping companies tried to cut fuel costs.

“There is also the practice of ‘slow steaming’ – physically running the ships at lower speeds – which can effectively take between five to seven per cent of capacity out of the global freight fleet,” he said.

With fears growing that shoppers may hold back in the rest of the year, retailers are more anxious than ever to ensure they have the right goods in stock at the right time.

“You want a supply chain that moves things smoothly,” Jonathan Gold, vice-president of the National Retail Federation, said. “Right now, it’s not doing that.”


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