General

As the global container transportation continues to "chaos", following the freight forwarding giants DSV Panalpina, DHL Global Forwarding and GEODIS chartering to deal with the capacity crisis, Home Depot, the world's first cargo owner, also started the chartering model.

Home Depot is one of the largest importers in the United States. Ranked third in the top 100 importers of American consignees in 2020. In 2020, the volume of seaborne purchases reached 520,130 TEU, following Walmart and Target, and far ahead of rival Lloyd’s (Lowe's) 330,000 TEU and Ashley Furniture (Ashley Furniture) 296,000 TEU.

However, due to port congestion, container shortages and the impact of the epidemic, the shipments have slowed down. Ted Decker, President and Chief Operating Officer of Home Depot, said in an interview: "We own a ship that is entirely our own, and it will serve Home Depot 100%." This marks the company's first step forward and it also marks the first time the company has taken this step. The company became the world's first shipper to open a charter model.

Ted Decke said that the chartered vessel will begin operations next month, which is just one example of the unusual measures the company has taken in response to the ensuing challenges of the global supply chain. Ted Decke said that due to the surge in domestic demand in the United States, in rare cases, Home Depot will ship power tools, faucets, electronic components, fasteners and other "smaller, higher-value items" by air.

The container shipping market has been hit by equipment shortages, port congestion, and serious delays in shipping schedules. Shippers of larger, relatively low-value cargo have been hit hardest by the shortage of space and rising freight rates. Home Depot usually sells large items such as home improvement materials, garden furniture and power tools. A recent report by Sea Intelligence emphasized that for assembled furniture, freight now accounts for 62% of the retail value of the goods, while for large appliances, spot freight accounts for 41% of the value of the goods, and for small appliances, freight accounts for as much as 27% of the retail value. .

In addition, as the economy recovers from the epidemic, other retailers have to do their best to stock up on stores and distribution centers to meet consumer demand. For consumers, retailers’ logistics difficulties are manifested in shortage of goods, delays in the arrival of goods and rising prices.

Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, said the chaos in global shipping is at an important time for the industry. Retailers are entering the peak shipping season for holiday merchandise, which usually starts in August. "Now, they are all thinking of ways to reduce this risk to ensure that the products are received in time when the holiday sales begin." He said. "This means that products will be shipped to the market ahead of time, which may further cause additional congestion and delays."

Jonathan Gold said that since the outbreak of the epidemic more than a year ago, retailers have been constantly solving a series of problems, regardless of the size of the company and the type of goods sold. He said: "From clothing to footwear, to furniture, handbags, toys, consumer goods and electronic products, all are facing these problems." Soaring demand is one of the reasons for this problem.

Home Depot President Ted Decker said that during the epidemic, consumers' extreme demand for home furnishings began to heat up. The company's sales have risen steadily in multiple quarters, and this situation continued in the first fiscal quarter of this year. The company's same-store sales soared 31% year-on-year.

The current epidemic in South China ports has become a new focus. As the anti-epidemic department has strengthened its prevention and control measures against the epidemic, it has also restricted the number of ships that can enter this major export hub port, which has forced some ships to jump into the port or wait for ships to wait for the port to increase the delay of the ship (see article: Yantian Port congestion) The impact of the Suez Canal has exceeded the blockage of the Suez Canal! Major shipping companies have added more voyages to the port); Maersk and other large shipping companies have issued warnings to customers about shipping delays; according to Reuters, this caused the largest since 2019 Backlog. These problems also lead to rising costs.

Nathan Resnick, Sourcify's chief executive officer, said that shipping rates have "rised significantly." In an interview with CNBC earlier this week, it said that the cost of a 40-foot container to the west coast of the United States has risen by 150%, while the increase in the east coast of the United States is even higher. (View article: South China port congestion crisis struck, Asia and Europe freight rates rose to 20,000 US dollars, an increase of 1,000% over the same period) He estimated that companies may have to increase prices by 5% to 20% to offset this increase. Most of the costs may be passed on to consumers.

Since the epidemic, it has become a top priority to transport goods globally in a faster and more efficient way. At present, in terms of how to alleviate the continuing challenges facing the problem, it has also risen to the highest level of corporate management. The strategies that corporate executives are exploring include increasing air transportation by importing materials and commodities from other countries outside Asia or other countries closer to the United States. And place orders earlier, thus diversifying the supply chain.

Fearnley Securities, the Norwegian investment bank, said that the favorable situation in the franchise leasing market continues, and all business sectors have seen further gains. Compared with one-year and multi-year leases, the rents for short-term leases will also rise sharply. The price of 2,700 TEUs is approaching US$40,000 per day, while traditional Panamax container ships are approaching US$60,000 per day—six times the average from 2017 to 2019. The container sector is still very strong, and liner rates continue to rise, supporting charter rates and overall asset value.

Retailers are trying to keep pace with high consumer demand and have not yet begun to accumulate substantial inventory. With the approach of autumn and holiday peak seasons, this has brought an interesting situation to the market, and freight rates may continue to remain high for the rest of the year. In the week ending June 11, the Shanghai Container Freight Index (SCFI) rose another 2.5%, which was the fifth consecutive week of gains, bringing the second quarter's increase to 43%.

Although the time charter activities of large ships have slowed down due to short-term capacity shortages, charterers are more actively seeking charter contracts for feeder-sized ships. This investment bank has noticed that for ships above 3,000 TEU, three to five years of chartering are becoming more and more the norm.

At least in the case of freight forwarding giant DSV, chartering is to ensure transportation space and shorten transportation time, not to save costs. Similarly, GEODIS also stated that its main goal is to allow customers to ship goods on time in a "reasonable and economical way."