Logistics companies’ profits surge as holiday season picks up

  • A fundamental shift in consumption patterns this year has ramped up the pressure on the US’s logistics networks as buyers spend on physical goods instead of experiences.
  • Ocean shipping and expedited airfreight prices from Asia to the US are now two to three times as high as a year ago, and ports are straining to cope with record import levels.
  • Container lines, cargo-plane operators, online retailers with transportation networks, and integrators such as FedEx, UPS, and DHL are scaling up capacity and reaping rich rewards.
  • But surging e-commerce demand and shortages of truck and van drivers could see the delivery of many holiday presents delayed until 2021.
  • Visit Business Insider’s homepage for more stories.

As this year’s holiday delivery season ramps up, US supply chains are struggling to cope with unprecedented logjams, even before COVID-19 vaccine distribution starts sucking away what little slack remains in the system. The intense pressure on logistics networks could leave retailers short of supplies, consumers empty-handed come Christmas morning, and a few well-positioned companies pocketing major profits. 

“As the economy has recovered, we’ve seen imports spike,” Jonathan Gold, the National Retail Federation’s head of supply chain and customs policy, said. “We’ve also seen an explosion of e-commerce over the past couple of months, and that has put a lot of pressure on domestic supply chains.”

The nature of consumer demand has shifted, too.

“We’re not going to sporting events, we’re not going on vacation,” Brian Bourke, the chief growth officer of Seko Logistics, told Business Insider. “What we’re doing instead is we’re buying things.

“We’re renovating our homes. We’re buying patio furniture, we’re buying sports equipment, exercise equipment, bikes, consumer electronics, phones, and anything involving a home office or a home remodel. I think desks are the No. 1 commodity right now, but it’s all flying off the shelves.”

The moment is unprecedented, with demand from consumers for certain products so intense that cargo previously imported by sea is now being flown in — and at a great expense. “We’re flying hot tubs,” Bourke said. “You couldn’t make it up.”

The result: Los Angeles and Long Beach ports racked up record volumes last month. Warehouse space is so hard to find that many retailers are using vacant stores as order-fulfilment hubs. The pandemic has exacerbated shortages of truck drivers and warehouse workers. Express-delivery companies are at capacity.

Shipment delays caused by shortages of empty containers and the lack of trucking options in parts of the US have pushed some to threats of violence.

“We’ve had two people threaten to sue us and one threaten to come to the office and beat up staff members over delays securing truck chassis in Los Angeles,” a California freight forwarder told Business Insider, speaking anonymously to avoid disparaging his customers.

And as demand overwhelms supply and customers pay premiums for guaranteed delivery, those in the business of freight and logistics are racking up profits.

Big money on the high seas

Global container volumes have been contracting for most of the year, but it hasn’t hurt the world’s leading container lines, which are now taking full advantage as demand ratchets up.

Space on vessels steaming to the US is now sold out, even though the cost of shipping a container from China to the US West Coast is about three times as expensive as it was a year ago.

Freight forwarders are now recommending that shippers book capacity weeks in advance and still expect delays. For US exporters, finding an empty container is proving increasingly difficult as carriers rush empty boxes back to Asia to pick up fresh high-paying cargoes destined for the US.

The shipping analyst Drewry said it expected the container-shipping sector to post profits this year of $11 billion, a performance that would be the industry’s most lucrative since 2010. Maersk, the…

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