Fighting for cargo space

When retailers slashed inventory last year in the midst of the economic downturn, ocean carriers began taking ships out of service, much the way airlines have been pulling aircraft from their schedules. The result is that retailers are paying two to three times last year's freight rates - that is, when they can find space. From the NYT:

Carriers also moved to "slow steaming," traveling at slower and more fuel-efficient speeds, while the companies producing containers, the typically 20- or 40-foot boxes in which most consumer companies ship goods, essentially stopped making them. "All my customers, they're having a terrible time," said Steven L. Horton, principal at Horton Global Strategies, which negotiates freight contracts for companies. "With the increased cost and them not knowing if they're even going to get the space or equipment, it's a weekly battle."

The demand for space would seem to suggest that retailers are looking for a decent sales stretch between now and the end of the year; FedEx reported on Monday that it expected increased earnings. (Give the recent consumer confidence numbers, I'm not sure where they're coming up with such encouragement.)

The shipping companies slowly added ships back into the system early this year, but they did so haltingly, not wanting to add too much supply and risk having their rates fall. (Major carriers largely hew to the rates set by carrier groups, which are allowed to discuss and set voluntary rates, under antitrust immunity.) Lifetime Brands, which makes and sells products under brand names like Cuisinart and KitchenAid, said it was now paying about double last year's rates, and Costco said it was now back to 2007 rates.