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Biden wants to terminate the nine major foreign shipping companies to continue to blackmail US importers and exporters.

17 Jun 2022

By Arthur Chen   

From now on, shipping carriers must operate carefully, and it is impossible to easily create a shortage of supply in capacity. That is to say, the "blank sailing" cannot be manipulated as same way as last year.

The U.S. inflation rate unexpectedly hit a 40-year high in May. President Biden blamed high freight rates for soaring inflation, blamed record oil prices on Russia’s invasion of Ukraine, which led to rising prices, while targeting Exxon Mobil and other “greed” of oil merchants and shipping companies. Biden made a speech to let the nine major foreign shipping companies understand  they cannot continue to extort, and even called on Congress to "ban" the maritime industry. On June 10, local time, Biden visited the Port of Los Angeles, the busiest port in the United States, and delivered a speech. Biden said, the United States should do more to suppress inflation as soon as possible, and called on Congress to pass a bill to reduce energy costs and shipping rates.  Biden's previous videoconferences with some U.S. retailers and farmers have received many serious complaints against shipping companies. Hal Lawton, president and CEO of Tractor Supply Company, said: "In 2020, we were shipping $3,500 a container, and by September and October last year, our rates were as high as $2. $25,000 to $25,000.” Wade Miquelon, president and CEO of Jo-Ann Stores, another retail company, said costs for the company rose by $100 million due to higher shipping costs. "We're not a big company, but the $100 million in freight that the shipping companies are adding to us is more than our entire profit," he said. Vincent Duvall, president of the American Farm Bureau Federation, worries that if agricultural Shippers continue to face the challenge of high shipping rates and lose overseas customers.

 

Biden slammed the nine major shipping companies on the route from Asia to the United States for taking advantage by chance of covid outbreak, raising prices by up to 1,000%, and making a profit of $190 billion in just one year. Biden used the Port of Los Angeles as a background to highlight his efforts to fight inflation. He emphasized that after last year's efforts to resolve port congestion, 97% of all cargos during the holiday shopping season were delivered on time. Biden also met with Gene Seroka, executive director of the Port of Los Angeles, and Mario Cordero, director of the Port of Long Beach. At present, the labor representative International Terminal and Warehouse Union (ILWU) is negotiating a new labor contract with the Pacific Maritime Association (PMA), which represents the management. The current contract expires on July 1. If talks break down, it could shut down the Port of Los Angeles at its busiest time of year, further disrupting supply chains already hampered by the covid pandemic.

 

The Democratic leader of the U.S. House of Representatives said it plans to adopt the Senate version of the Ocean Shipping Reform Act next week to increase the authority's oversight powers over maritime operations and limit the industry's ability to levy special fees, which have been criticized as Factors that push up shipping rate. The bill will make it harder for shipping carriers to refuse export cargoes, which over the past two years have driven a shortage of containers in North America by sending large volumes of empty containers back to Asia to earn more profit. The White House pointed out that from 1996 to 2011, the three major alliances of nine shipping carriers accounted for 30% of the world's container shipping, and now control 80% of the world's container ship capacity and 95% of the east-west trade line. The White House said the increase in transportation costs could add a full percentage point to consumer price growth next year.

 

Biden's sharp language reflects the general concern of the American people about the current state of the economy. Experts predict that Democrats could lose their congressional seat in the November midterm elections if inflation does not cool. U.S. data released on Friday showed that the annual increase in the consumer price index (CPI) unexpectedly set a 40-year record in May, as rent, gasoline and food prices rose sharply, and consumer confidence fell to a record low in June. In order to quell the pressure of rising prices, the US House of Representatives plans to adopt the shipping reform bill passed by the Senate next week to strengthen the supervision of multinational shipping companies, which will be the biggest reform in 24 years. Since mid-May this year, many LA/LB shipping schedules on the West Coast of the United States have not been temporarily cancelled. Due to some cities lockdown in China, many bookings have not been filled, but shipping carriers are still have sailings set on. They dare not to apply skipping ports nor blank sailings like last year they did in which have caused the supply of capacity to be always smaller than the demand so that the freight will be soaring. It seems that the shipping lines have already begun to carry on the administrative pressure of the United States, and they dare not arbitrarily reduce the supply of positions. From this aspect, we have indeed initiated the opportunity for ocean freight to go down.

 

Ironically, according to the FMC survey, the giant rise in prices in the ocean shipping industry was driven by a surge in U.S. consumer demand resulting in insufficient vessel capacity. Insufficient capacity and excess demand were causing supply chain problems, and there were intense competition among carriers. President Biden's blaming lack of competition for high ocean freight rates may not hold liability to carriers. The report also stated that there is no evidence of collusion among major ocean shipping companies! However, in the hyperinflation now, shipping companies make a lot of profits, and the high freight rate is also one of the factors of inflation, even if the shipping companies currently do not break rule to be punished, but from now on, shipping companies must operate carefully, and it is impossible to easily create a shortage of space.  That is to say, the "blank sailing" cannot be manipulated as same way as last year. This is a good news to consumers.

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