Biggest U.S. Retailers Charter Private Cargo Ships to Sail Around Port Delays

Some of the largest U.S. retailers by revenue — are among companies paying for their own chartered ships as part of broader plans to minimize disruptions, a move for most companies. Expensive and unattainable option. Some chains are passing on these additional costs by raising prices for shoppers.

Officials said chartered ships are smaller than those operated by companies such as Maersk and carry a small slice of total imports. According to freight forwarders, ships that hold about 1,000 containers are almost twice as expensive as the cost of carrying cargo on an average 20,000-container vessel.

But charters provide a way for large retailers to work around bottlenecks at ports like Los Angeles, by re-shipping cargo to less congested docks like Portland, Ore., Oakland, Calif., or the East Coast. It can also help retailers ensure that key products like electronics and decorations arrive during the holiday season.

Shipbrokers said small vessels chartered for point-to-point voyages now earn about $140,000 a day, several times higher than pre-pandemic levels, when such sailings were rare due to high costs. “They at least know that the inventory will arrive in time for the Christmas rush,” said Vicky Jervau, sales manager at Athens-based freight forwarder Eritrans SA.

In May, Home Depot executives were looking for new ways to get goods on time when they got the idea to rent their ship, something the company had never done before. “It was almost started, I think, as a joke,” said Sarah Gallica, vice president of transportation at Home Depot. “Let’s just charter a ship.”

Products arriving on chartered ships make up a small percentage of Home Depot’s total import volume, she said, but the changes allow the company to have more control over when products arrive in stores and prioritize the most in-demand products. . For Home Depot, charters are moving plumbing supplies, power tools, holiday decor, heaters, and other items.

Costco’s chief financial officer Richard Galanti said the retailer has chartered three ships, each capable of carrying about 1,000 containers, to transport goods between Asia and North America. Each vessel will make up to 10 deliveries to Costco the following year. Those ships will account for less than 20% of the warehouse retailer’s import volume from Asia next year, he said.

Charters are more expensive than shipping through Costco’s specific carriers, Galanti said, but “give us some amount of your total that we control.” For example, he said it provides the ability to bring a ship to a new port if it encounters port congestion and cannot unload its cargo. He added that Costco also wants to prioritize seasonal merchandise that has to be sold at certain times of the year.

Walmart, the nation’s largest retailer with annual revenues of more than $500 billion, has chartered its own vessels earlier this year, using the tactic during the Los Angeles port attacks in 2012.

A spokesperson said the ships give Walmart visibility on arrival times and freight prices. Due to port congestion in Los Angeles, Houston and Savannah, Ga., some chartered vessels are being rerouted to smaller, less busy ports such as Mobile, Ala., the spokesperson said. In recent weeks, Walmart has also sent its employees to congested ports to facilitate landings, he said.

Ship leasing is a strategy that has been financially out of reach for smaller retailers, with potential gains for larger companies in the coming months.

Podzli LLC, a small Papillion, Neb., party-supply retailer that sells online, has about half its inventory, which, due to shipping delays, is eating into revenue, said founder Jeremy Podliska. The company is paying about 55% more for the products it receives than in 2019, he said, often broken down into smaller quantities that come in pieces. As a small company renting a dedicated ship or airplane is “just not an option for us”, Mr Podliska said.

Two years ago the company sold a 12-pack of sombrero party hats for about $32, Mr. Podliska said. Today, that same pack sells for $52, he said, and the price will go up as he sells through the new inventory that comes with higher shipping costs. They expect buyers to stomach the hike, he said.

“My guess is there is some limit to how much you can charge for a sombrero,” he said.

Meanwhile, delays continue to mount at major US ports. According to the Marine Exchange of Southern California, recently there were more than 60 boxships waiting to be pulled into the ports of Los Angeles and Long Beach, up from about 25 a month ago. The backup is also expanding to the ports of the East Coast.

on dollar tree Inc.,

Chief executive Michael Wittensky said in September that regular shipping carriers are meeting about 60% of their contractual commitments with the discount retailer.

The 16,000-store company is gaining dedicated space on chartered ships for the first time, Mr Wittensky said, including a larger vessel contracted for three years. Dollar Tree aims to add more charters this year, he said, as well as source more products domestically and internationally that do not rely on trans-Pacific routes. It is also adding higher priced products to its stores as transportation and other costs rise.

Freight forwarders said the Covid-19 disruptions still plague major ports and the large ships that use them. He said it is common for a large boxship carrying empty containers from Europe to be held outside Shanghai for a week while the crew is tested for the virus.

Capital Maritime Group, which operates 108 ships of all types, had a client charter for a 2,000-container ship to move furniture and sporting clothing from China to Liverpool, England, said Evangelos Marinakis, president of the Athens-based company. said.

“’Using small boxships for transoceanic point-to-point selling is something we have never seen before,’ Mr Marinakis said, adding that small boxships drive the company strong profits. In addition to retailers, large companies that supply stores, such as Coca-Cola Co.

, are also hiring boats to clear the disturbances.

According to Fretos Baltic, moving a container across the Pacific on a chartered vessel costs almost twice as much as shipping through major cargo liners last week at $16,750 per 40-foot container, up from the same price last year. The time was about $5,000. index.

“Freight rates remain high, but they have stopped and we don’t expect another spike,” said Jonathan Roach, container shipping analyst at London-based Bremer ACM Shipbroking. “The supply chain is still in tatters, but come next year, it may not make sense for Target and Dollar Tree to use private charters.”