Encore: Examining the state of global shipping and what it might mean
JUANA SUMMERS, HOST:
During the pandemic, the cost to fill and transport shipping containers soared. Now shipping rates have dropped by roughly 80% over the last six months. So what's that mean for consumers? Here's Paddy Hirsch and Wailin Wong from NPR's daily economic podcast, The Indicator.
WAILIN WONG, BYLINE: The last big shipping boom was in the early 2000s. This is when ocean shipping carriers were big beneficiaries of the increase in global trade due to China's expansion.
PADDY HIRSCH, BYLINE: Yeah. And that boom was followed by the financial crisis of 2008, of course, and a downturn so severe that many carriers went bust and either folded or were bought out by competitors.
WONG: But then came COVID. Emily Stausboll is an analyst covering ocean shipping carriers at Xeneta. She says the pandemic really turned things around for them.
EMILY STAUSBOLL: We had a huge increase in demand for containerized goods, typically from Asia into the U.S., because of these stimulus packages, certainly, and because people were at home, right?
WONG: Demand for containers and the ships to put them on skyrocketed, as did the amount that carriers were able to charge. Some people wonder whether all that consolidation during the Great Recession allowed carriers to collude and push prices higher.
HIRSCH: At the end of 2019, it cost less than $2,000 to rent a large-sized container to get from China to Los Angeles. Eighteen months later, carriers were billing 10 times that amount. Emily says the industry had never seen anything like it.
STAUSBOLL: Last year, in 2021, the shipping companies made more than some of those really big tech companies. And it was just completely unheard of.
WONG: All of this good news for the carriers was, of course, terrible news for everyone else, like the retailers who were renting these containers, also known in the industry as shippers. And these shippers had a number of options. They could eat the increased costs themselves or they could find a way around them.
HIRSCH: Yeah. Amazon, for example, even pre-pandemic, began making its own containers and chartering its own ships to cut shipping costs. But, of course, most retailers don't have the kind of money or muscle that Amazon has, so they resorted to Option 3 - they passed the costs on to the consumer.
WONG: Today, however, everything has changed, and retailers who want to ship goods have the upper hand over the carriers.
HIRSCH: Yeah. Today we're importing a lot less of the things that we bought during the pandemic. Throw in the knock-on effects of the war in Ukraine and the resulting economic slowdown and suddenly, there's a lot less demand for containers and the ships that carry them.
STAUSBOLL: Shippers have gone from being unable to get their carriers on the end of the phone and say, hey, I need to talk to you, to suddenly, all the carriers are calling them and saying, hey, do you have any containers for me that I can move?
WONG: It's presumably great news for consumers who will no doubt see the benefits of these cost cuts and lower prices of goods very soon, right?
HIRSCH: Well, we'd be well advised not to hold our breath for lower prices, not least because the carriers are doing everything that they can to keep freight rates up. Emily says they're canceling sailings and are scrapping older ships, all in a bid to reduce the overcapacity in the market.
WONG: Shipping has always been a boom-and-bust business, but it was the sheer scale of the pandemic boom and the bust that we're in now that took everyone by surprise.
HIRSCH: And that, of course, includes regulators who allowed all of that consolidation in the industry after the financial crisis, figuring that it benefited the consumer. Emily says that now that the seafoam is settling, those regulators are going to be looking afresh at the shipping industry to ask how it was that prices went so high so quickly during the pandemic and maybe to see how we can try to stop that happening the next time.
WONG: Wailin Wong.
HIRSCH: Paddy Hirsch, NPR News. Transcript provided by NPR, Copyright NPR.