US importers, straining under a tapped-out supply chain, are increasingly offering to pay highly inflated prices for long-term shipping contracts that may not even be honoured as they try whatever it takes to guarantee the arrival of their products.
The pandemic-driven boom in demand for goods has pushed both contract and spot rates for shipping to record highs ─ getting merchandise from place to place costs about 11 times more than it did before the Covid-19 outbreak.
With demand so high and capacity limited, importers are paying up to avoid a repeat of 2021, when some contracts set at lower prices weren’t honoured, leaving customers without their goods.
Importers are accepting higher contract rates because they “fear that the market can get even worse,” said Lars Jensen, chief executive of Copenhagen-based Vespucci Maritime, a shipping market analysis firm.
“Fear of losing out on capacity to some degree trumps the fear of paying too much right now.”
Contracts are typically negotiated on a yearly basis with importers and carriers agreeing to a minimum capacity level between certain ports, and the spot market used for freight shipped outside of the agreed terms. But this year, importers are prepared to pay more, locking in higher, pandemic-era prices for two or even three years ─ despite some predictions they won’t stay as elevated ─ to protect themselves from the volatile spot market.
The shipping chaos has completely changed how David Kunelius, president of Minnesota-based medical device company MedSource Labs, gets merchandise to the US from Asia.
“Pre-pandemic, we would set up shipping contracts for an entire year”, paying about $4,000 per 40-foot container, which allowed for planned investment in research and development, Mr Kunelius said.
But starting last year, MedSource Labs was getting a new quote for cargo every two weeks, increasing by thousands of dollars each time to about $23,000 now.
Rates are unlikely to return where they were before the pandemic, when carriers suffered from overcapacity and low profits for years, said Stephanie Loomis, vice president of international procurement at freight forwarder CargoTrans.
“It’s settling into the market now that the days of really very low, ridiculously cheap ocean rates are over,” she said, adding that prices are unlikely to stay at these levels for more than a couple of years and will probably settle a little lower.
While shippers are interested in securing longer-term freight contracts earlier and for greater durations to best ensure reliability and predictability, carriers only have so much space aboard ships. Orders for new capacity reached a record last year, but that will only relieve markets in 2023 and 2024, according to VesselsValue data.
And with supply-chain disruptions stemming from Russia’s military offensive in Ukraine and China’s Covid Zero policy locking down major manufacturing regions in the Asian nation, things could get harder to predict in the short term.
All this while US goods imports continue at records amid decades-high inflation rates.
Fear of losing out on capacity to some degree trumps fear of paying too much right now
Lars Jensen,
chief executive of Vespucci Maritime
The major ocean carriers have faced criticism for charging such high rates, leaving many shippers and importers ─ or beneficial cargo operators known as BCOs ─ without options.
US President Joe Biden asked Congress to look at the biggest ocean carriers and whether the three major shipping alliances they have formed are anti-competitive. Exporters are paying the price too, as carriers often skip picking up goods to rush containers back to Asia for another load of more lucrative imports to the US West Coast.
Larger freight forwarders are also signing multiyear agreements, and paying more for securities through add-ons, said Robert Khachatryan, chief executive of Los Angeles-based cargo forwarder Freight Right Global Logistics.
Besides a contract rate with a guaranteed allocation of space, a carrier may take 20 per cent of your contracted containers at a lower price with guaranteed space ─ provided importers also book others at premium rates, Mr Khachatryan said.
Last year, ocean carriers offered a lot of “premium services”, including ensuring cargo was loaded on the first ship out, for example. Those extra charges became a substantial part of container movement from Asia to the US and while they are less common right now, they could make a comeback, Ms Loomis said.
Meanwhile, importers like Mr Kunelius continue to battle the volatility.
Indoor cricket in a nutshell
Indoor cricket in a nutshell
Indoor Cricket World Cup - Sept 16-20, Insportz, Dubai
16 Indoor cricket matches are 16 overs per side
8 There are eight players per team
9 There have been nine Indoor Cricket World Cups for men. Australia have won every one.
5 Five runs are deducted from the score when a wickets falls
4 Batsmen bat in pairs, facing four overs per partnership
Scoring In indoor cricket, runs are scored by way of both physical and bonus runs. Physical runs are scored by both batsmen completing a run from one crease to the other. Bonus runs are scored when the ball hits a net in different zones, but only when at least one physical run is score.
Zones
A Front net, behind the striker and wicketkeeper: 0 runs
B Side nets, between the striker and halfway down the pitch: 1 run
C Side nets between halfway and the bowlers end: 2 runs
D Back net: 4 runs on the bounce, 6 runs on the full
Winners
Best Men's Player of the Year: Kylian Mbappe (PSG)
Maradona Award for Best Goal Scorer of the Year: Robert Lewandowski (Bayern Munich)
TikTok Fans’ Player of the Year: Robert Lewandowski
Top Goal Scorer of All Time: Cristiano Ronaldo (Manchester United)
Best Women's Player of the Year: Alexia Putellas (Barcelona)
Best Men's Club of the Year: Chelsea
Best Women's Club of the Year: Barcelona
Best Defender of the Year: Leonardo Bonucci (Juventus/Italy)
Best Goalkeeper of the Year: Gianluigi Donnarumma (PSG/Italy)
Best Coach of the Year: Roberto Mancini (Italy)
Best National Team of the Year: Italy
Best Agent of the Year: Federico Pastorello
Best Sporting Director of the Year: Txiki Begiristain (Manchester City)
Player Career Award: Ronaldinho
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Day 2, Dubai Test: At a glance
Moment of the day Pakistan’s effort in the field had hints of shambles about it. The wheels were officially off when Wahab Riaz lost his run up and aborted the delivery four times in a row. He re-measured his run, jogged in for two practice goes. Then, when he was finally ready to go, he bailed out again. It was a total cringefest.
Stat of the day – 139.5 Yasir Shah has bowled 139.5 overs in three innings so far in this Test series. Judged by his returns, the workload has not withered him. He has 14 wickets so far, and became history’s first spinner to take five-wickets in an innings in five consecutive Tests. Not bad for someone whose fitness was in question before the series.
The verdict Stranger things have happened, but it is going to take something extraordinary for Pakistan to keep their undefeated record in Test series in the UAE in tact from this position. At least Shan Masood and Sami Aslam have made a positive start to the salvage effort.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
EA Sports FC 26
Publisher: EA Sports
Consoles: PC, PlayStation 4/5, Xbox Series X/S
Rating: 3/5
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
UAE currency: the story behind the money in your pockets
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
The years Ramadan fell in May
From Europe to the Middle East, economic success brings wealth - and lifestyle diseases
A rise in obesity figures and the need for more public spending is a familiar trend in the developing world as western lifestyles are adopted.
One in five deaths around the world is now caused by bad diet, with obesity the fastest growing global risk. A high body mass index is also the top cause of metabolic diseases relating to death and disability in Kuwait, Qatar and Oman – and second on the list in Bahrain.
In Britain, heart disease, lung cancer and Alzheimer’s remain among the leading causes of death, and people there are spending more time suffering from health problems.
The UK is expected to spend $421.4 billion on healthcare by 2040, up from $239.3 billion in 2014.
And development assistance for health is talking about the financial aid given to governments to support social, environmental development of developing countries.
Company profile
Name: Back to Games and Boardgame Space
Started: Back to Games (2015); Boardgame Space (Mark Azzam became co-founder in 2017)
Founder: Back to Games (Mr Azzam); Boardgame Space (Mr Azzam and Feras Al Bastaki)
Based: Dubai and Abu Dhabi
Industry: Back to Games (retail); Boardgame Space (wholesale and distribution)
Funding: Back to Games: self-funded by Mr Azzam with Dh1.3 million; Mr Azzam invested Dh250,000 in Boardgame Space
Growth: Back to Games: from 300 products in 2015 to 7,000 in 2019; Boardgame Space: from 34 games in 2017 to 3,500 in 2019
