Retailers Aim to Halve Ocean-Freight Costs as Shipping Demand Falls

Retailers are aiming to cut their ocean-freight costs by at least half.

The Wall Street Journal (WSJ) reported Tuesday (Feb. 14) that retailers and ocean carriers will be meeting at the Journal of Commerce’s annual TPM Conference Feb. 26 to begin their negotiations on long-term contracts.

The background of the conference will be different from what it was last year. A year ago, there was a backlog of ships waiting to unload cargo due to a COVID-driven surge in shipping volumes, a lack of space on docks and a shortage of trucks and workers, according to the report.

This year, after months of easing pressure on the supply chain, retailers are holding more inventory than they can sell and freight companies are having trouble filling their ships, the report said.

These trends have been reflected in ocean-freight costs. The average cost of shipping a container from China to the West Coast of the U.S. was $3,174 in April 2021, surged to $8,607 in April 2022 and then plummeted to $2,618 on Feb. 9, per the report.

Retailers told the WSJ that the newly negotiated rates could be as little as half or even one-third of what they paid last year, that this may be the biggest cost savings they see throughout their operations this year compared to last year, and that they should be able to lower the prices they charge their own customers for merchandise.

This report comes about a week after global shipping giant Maersk released an earnings report that projected that its profits in 2023 will be $2 billion to $5 billion — down from $31 billion in 2022.

“We are seeing this correction happen,” Maersk CEO Vincent Clerc said in an interview with the Financial Times. “It creates a few new challenges. First and foremost though, it’s a return to normal.”

The news also comes about three weeks after global freight booking and payment platform Freightos announced that it was going public and had raised more than $80 million to scale the business and further develop its technology stack.

“Supply chains are fragile, and the last two years demonstrated how valuable Freightos is and can be,” Freightos CEO and Chairman of the Board Zvi Schreiber said at the time.