MGA chief executive Isaac Larian has warned that shipping delays could seriously affect this Christmas.
With falling container rates, US retailers are bracing themselves for delays as some shipping lines try to boost prices by cancelling voyages.
Reporting from the TPM23 shipping conference in California this week, Reuters reported that carriers such as MSC and Maersk are trying to increase prices by cancelling voyages, which could mean a new round of delays as containers get bumped from one ship to the next.
TPM23 marks the unofficial start of the container shipping contract negotiating season when carriers and their US customers agree annual prices. The Asia-US trade lane is the most lucrative for carriers, and those contracts set the tone for talks in other regions.
Already, in January, the Port of Los Angeles reported 17 cancelled voyages and warned of more to come.
“If (carriers) keep bumping containers, we could end up missing Christmas,” Isaac Larian, chief executive of MGA Entertainment, said.
Reuters reports that MGA has already switched around 75% of shipments of products such as Rainbow High and L.O.L. Surprise! dolls to the short-term spot market from the long-term contract market. The company is paying around $1,150 per container – a cost saving of more than $18,000 from peak.
Volatile spot rates were the first to plummet when pandemic-weary consumers shifted spending from goods to travel and entertainment. Now the gap between spot and contract rates is closing, pressured by the threat of recession and competition to fill ships, Peter Sand, chief analyst at air and ocean freight rate benchmarking platform Xeneta told Reuters.
When demand was booming, carriers raked in record profits by focusing on the most lucrative cargo, but shippers now want payback for ocean cargo costs that in some cases have quadrupled.
It is “shippers’ revenge,” said Jon Monroe, an industry consultant and North American representative of Singapore-based Transfar Shipping. Previously loyal customers are aggressively comparison-shopping, spreading their business around and gambling on the spot market, experts said.
MSC vice president Allen Clifford said some larger customers were signing at near spot rates.
Customers and carriers do not often discuss contract talks, but in recent earnings calls officials for Walmart – the No.1 US container shipper – and Mattel Inc both said they expected to benefit from lower rates.