Container shipping increases looming
By Powell Slaughter -- Furniture Today, April 21, 2003
Greensboro, N.C. — Furniture importers are facing across-the-board freight-rate increases, fuel surcharges and peak-season charges that could tack as much as $1,000 onto the cost of a 40-foot container.
Shippers plan to raise the price of 40-foot containers by $700 for port-to-port service, and $900 for product that continues overland from the West Coast. The increases are set to take effect May 1.
"A couple of carriers are backing off a bit, but not much," said Jim Garst, director of the International Furniture Products Shippers Assn., based here. "They're in a group-think mode. They're doing the same thing they did last year but asking for a lot more."
Last year's increases were around $300 per container, he said.
The IFPSA, which includes 54 manufacturer/distributors, furniture importers, retailers and suppliers, has three carriers under contract — Hanjin, Mediterranean Shipping and China Shipping.
"We're in heavy negotiations to bring that increase down," Garst said. "If the carriers would understand that half the increase would be appropriate, it would help. Historically, this is the most they've ever asked for."
The increases were not unexpected. Mass-market retailers like Wal-Mart and Target, which use the most containers, have just negotiated shipping contracts for the fall selling season.
While the proposed increases are substantial, they haven't inspired the same feelings of "hopelessness" as did the traffic jam of merchandise during work stoppages at West Coast ports last year, said Joe Elmore, director of marketing and sales at full-line importer HomElegance.
"It's not like we haven't managed (the increase) into the program, or like it wasn't discussed at market," he said. "Where we can absorb it we will, and where we can't we'll pass it along. This increase was anticipated."
HomElegance customers, he said, are more worried about volatility in the retail environment than volatility in freight prices.
Greg Noe, chief operating officer of case goods and leather upholstery importer Lifestyle Enterprise, said the increase represents a return to freight prices seen a couple of years ago.
"Based on who you are and what kind of rapport you have with your carriers, you can negotiate some of those charges, especially peak season charges," Noe said.
The problem with negotiating lower charges, he said, is that the limited number of containers will go to those customers paying the most money, and this can end up costing more money if an importer has to pay a premium in order to move up in the pecking order. Lifestyle, Noe said, already runs the lowest overhead possible.
"If I have a customer who wants a landed price and we have a (freight) increase, I guarantee them it won't get any higher over the next year, and that if our rates drop next week I'll pass the savings on immediately," he said. "Even if freight rates go up 60%, I can still be competitive.... If I have 25 sets of bedroom that ship on a container going up $1,000, that's still just $40 a set."
