The space crisis has been dominating the Asia to U.S. market since the end of June 2018. The crisis continues to cause major disruptions in import supply chains and increase freight costs of container shipments to the United States. The experts that project supply/demand balances were way off the mark leaving no warning of an impending space crunch to importers. In a two-week period, the market went from a surplus-space environment to a zero-space environment.
How could the Asia to U.S. market deteriorate to a point where finding space for a single container has become an enormous challenge? The carriers made a strategic decision to remove vessel capacity from the market. Secondly, the U.S. government made a strategic decision by threatening to impose tariffs on Chinese origin goods. The threat of tariffs alone caused an immediate reaction in the shipping industry. Shippers began to pull their imports forward in an effort to avoid paying increases in their duty rates. This caused imports to the U.S. to spike overnight. Carriers were pulling capacity off the market at the same time as demand unexpectedly exploded. The perfect storm had been created in the shipping industry.
Carriers initially predicted the space crunch would ease significantly by the middle of October. However, the threat of additional U.S. tariffs on Chinese goods scheduled to be implemented January 1, 2019 has further impacted the Asia to U.S. market. Importers are coordinating with their vendors to pull additional cargo forward that would normally ship in 2019 to avoid paying the potential January 1, 2019 tariffs. As a result, carriers are warning importers that space shortages will persist through the end of 2018.
The International Housewares Shippers Association (IHSA) is a not-for-profit association formed to benefit companies belonging to the International Housewares Association (IHA). Through the combined leverage of members, IHSA negotiates freight contracts and partners with other logistics providers to lower supply chain costs.
IHSA’s main function is to negotiate the lowest possible transportation rates and provide the highest quality service for all participating members. Additionally, IHSA members receive valuable market intelligence and advice through regular newsletters and briefings.
IHA member companies looking to reduce their ocean freight costs or have questions about an ocean freight issue are encouraged to contact IHSA to learn about the program. Contact IHSA at +1-513-489-4743 and learn more on our website.
