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Tuesday, Jul 5, 2022

Rates

By LARRY KANTER

Senior Reporter

The winter months are generally quiet ones in the harbor area, a respite from the heated holiday rush of the fall. But not this year.

Ocean-shipping rates from Asia are jumping as much as 40 percent in May. And that is leading many shippers to begin moving their merchandise earlier than usual.

On May 1, shipping rates in the eastbound lanes between Asia and the West Coast are going up $900 per 40-foot container. During the peak shipping season from June 1 to Nov. 30, the carriers will add an additional surcharge of $300 on top of the new rates.

That’s contributing to a rise in local cargo volumes. More than 336,000 container units moved across the docks at the Port of Long Beach in December, an 11.8 percent jump from December 1997. Figures for the Port of Los Angeles were not available late last week.

“We’re trying to move as much as we can before May 1,” said Mike Gray, manager of corporate logistics for K-Swiss Inc., a footwear manufacturer that imports more than 1,000 containerloads of athletic shoes a year.

The new rates represent an increase of 30 percent over K-Swiss’ 1997 levels, Gray said. K-Swiss will have little choice but to pass those added costs on to its distributors and retailers, he added. “Those costs have to go somewhere,” he said.

Shipping lines say the rate hikes are necessary to offset the costs exacted by the severely lopsided trade flows created by the Asian economic crisis. While imports have been streaming into the United States, exports generally have been dormant. As a result, shipping companies have been forced to send hundreds of thousands of empty containers back to Asia, at a cost of millions of dollars.

But that’s little consolation to importers who are facing the steepest freight increases in years.

“We’ll have to plan on big increases and that affects the consumer at the other end,” said Bob Holzman, president of Venice-based WindChaser Products Inc., an importer of electric fans, heaters and air-conditioning units from China. “The margins on our products are very competitive and there’s not room to eat a 30 percent increase in freight.”

A container of 1,850 fans currently costs about $2,500 to ship, Holzman said. During peak season, the price will rise to $3,800 an increase of almost $1 per fan. And for Holzman, moving the goods earlier is not an option. It would wreak havoc with his cash flow and the expense of warehousing the merchandise would probably offset any savings in freight costs, anyway.

“It’s a factor that we can’t control,” Holzman said. “Fortunately, my competition is being faced with the same problem.”

So will the increase in freight rates spark price inflation at the retail level? Unlikely, said Jack Kyser, chief economist of the L.A. County Economic Development Corp.

“What you’re looking at is a very competitive retail market and the people who are going to have to eat those increases are the distributors and retailers,” Kyser said. “Right now, no one has the confidence to push through price increases.”

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