Container shortage drives up shipping prices

TRANSPORTATION REPORTER

The cost of shipping consumer goods from Asia to Canada is surging, with another price increase kicking in Sunday, as freight forwarders face a shortage of containers this summer and fall.

"This is traditionally the peak season for imports coming from China to Canada," said Perry Lo, president of Canaan Transport Group Inc., a freight forwarding firm based in Mississauga, Ont. "And now we face a huge price hike."

Mr. Lo's company, which serves as an intermediary between ocean-going vessel owners and retailers, will have pay an extra $900 (U.S.) for each larger-sized container transported, starting this Sunday. The increase comes on top of $1,500 in new charges since February, raising the total cost of importing each container to more than $6,000 - nearly triple the rates from early 2009, when the recession crushed global shipping.

The market is bustling for "intermodal freight," or goods transported inside standardized metal containers that are readily transferred between ships, trains and trucks. Canadian Pacific Railway Ltd. reported Wednesday that it had $336-million (Canadian) in intermodal freight revenue in the second quarter, up 14.5 per cent from the same period last year.

But the railway sector, locked into long-term transport contracts, isn't reaping a windfall. Instead, it is multinational shipping firms that are pushing through a series of sharp price increases, trying to recoup some of their losses in the painful recession, industry experts say.

During the recession, major shipping companies reduced capacity, resulting in a shortage of available containers when demand start to pick up in the fall of 2009. As well, some vessels embraced "slow steaming" to conserve fuel during the economic downturn, meaning some shipments took 15 days to reach Canada instead of the usual 10 days, thereby tying up more containers.

Many shipping companies halted production of containers during the recession, but they are starting to resume manufacturing to help gradually replenish scarce supplies of the large metal boxes.

Industry observers say it's too early to determine the effect on consumer prices, with some retailers willing to absorb the higher costs, if they prove to be short-term spikes.

Evergreen Shipping Agency (America) Corp., agents for Evergreen Line, has served notice that cargo shipments will be subject to a "peak season surcharge" that takes effect Sunday. Goods going from Asia to Canada, for instance, will cost an extra $640 (U.S.) to $1,013 to ship, depending on the size of each container. Rates to ship from other parts of the world are also soaring.

"The container prices are going up, up, up," said Ruth Snowden, executive director of the Canadian International Freight Forwarders Association.

Maersk Line is another major shipping firm that has instituted peak season surcharges, saying it estimates that "there will be significantly higher demand for liner transport, coupled with a shortage" of containers across the industry. "We expect the shortage to last through the third quarter of this year," Maersk said.

Others slapping on surcharges include Zim Integrated Shipping Services, Hyundai Merchant Marine Co. Ltd., CMA CGA Group and Kawasaki Kisen Kaisha Ltd.

CANADIAN PACIFIC (CP)

Close: $60.61, up 79¢

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CP Rail

Source: Company reports