Over the years, freight forwarding costs have steadily declined as shippers continuously undercut each other in attempts to win and keep business from multiple clients. In 2014, containers were still shipping in a solidly four digit range on the left side of the decimal point, a healthy range that sustained and paid everyone for the job. As of 2016, it is almost like a rare Mew Pokémon sighting to see anything more than three digits on the left side of the decimal point. As of March 2016, a 40’ container from Shenzhen to Rotterdam cost less than a car payment for most people at $400 – which barely covers the cost of fuel, handling, and fees. In fact, prices have gone so low, that it would be cheaper to put your personal belongings in a shipping container as it sales around the world than to keep it in a local mini-storage facility.
As Hanjin’s impact is still developing and slowly trickling out, railways, terminal operators, and container lessors are price gouging the South Korean Line’s shippers by asking cargo owners to pay more than usual to bring freight into US ports after Hanjin filed for bankruptcy. Others are feeling the burn as many transportation providers have refused to touch the South Korean carrier’s assets and unpaid fees are piling up. “If you think about it, these were normal prices back two, three years ago. $1,200, $1,500, $1,800, this was all standard pricing. You have to understand, we WANT the shipping lines to stay open so they can move our cargo, because without them, we would all be screwed. The market is trying to right itself again right now.” said a senior executive of an US based NVOCC who declined to be identified.
With this crisis looking like it will be going on for a while, complaints of inappropriate pricing practices related to Hanjin’s cargo are starting to bubble up. With trucking companies that regularly haul Hanjin cargo at the brink of losing thousands of dollars since a normal billing payment cycle for goods hauled averages 60 days after goods are received. With no formal channels in the United States other than bankruptcy proceedings to pursue their claims, it seems like everyone in getting the short end of the stick as various companies keep a tight hold on all current Hanjin containers in hand and refuse to release unless steep prices are first paid up front. “Based on past experience during tumultuous times, we know that ocean carriers and marine terminal operators begin charging detention and demurrage charges that become extremely expensive in short order.” FMC Commissioner William P. Doyle says. “Although Hanjin believes such price gouging is wholly inappropriate and has tried to intervene (including notifying the Federal Maritime Commission), there is nothing more Hanjin or the Foreign Administrator can do,” Hanjin said in a court filing last Thursday.
Shippers are being pushed and encouraged to take a good look at the financial health of their carriers prior to committing their cargo, which proves to be more complicated than it seems at first glance. Even if a shipper were to select a healthy carrier, there are a few members in each of the three alliances, 2M, Ocean, and THE Alliance, that are fiscally unsound, and there is never a guarantee that a shipper’s cargo will travel on any particular carrier. “Many shippers are having to reassess their tactics. Do we go by carrier or by alliance? That is important so we can keep a balance of the service requirements we need and the ships that are going to deliver our products. There is sufficient competition between carriers to ensure we have enough choice. We look at the financial strength of an organization, their ability to invest, the quality of customer service. Price shouldn’t be the sole determinant.” Says John McCauley, Vice President of transportation and logistics at Cargill. However, this peak season, it looks like money, and how much money a company is willing to part with, will be the sole factor of whether large Hanjin shippers such as LG and Samsung will be getting their Thanksgiving, Black Friday, and Christmas shipments in before the holidays.