Supply Chain Fixes, Energy Transition Take Major Steps Forward – The American Prospect

The ocean shipping cartel, with three alliances controlling over 80 percent of the market, generated $190 billion in profit in 2021, five times as much as it did in the years 2010 to 2020 combined. The world desperately needed their services amid supply shortages, and they seized the opportunity with both hands. The cost of delays in ocean shipping translate into a de facto tariff of up to 20 percent on every finished and imported good.

Three major issues stand out beyond the usual dynamic of supply and demand. First, any cargo owner not named Amazon or Walmart can’t secure normal space on container vessels and so must pay a premium, which further drives consolidation. Second, companies are being charged “demurrage and detention fees” to get their goods cleared from port terminals and get containers back onto ships, when the ports are so clogged there’s no way for them to actually do that. And third, there is so much profit in China/U.S. shipping that it’s become more profitable for ocean carriers to grab empty containers and chug back eastward than wait to carry exports, particularly agricultural exports. So, as Matt Stoller has written, shipping companies don’t see the financial reward in exporting food from America, “even in the midst of what looks like a global famine.”

All of these issues point back to the last changes in ocean shipping rules, in 1998, which deregulated the industry, allowed secret deals between shippers and cargo owners that could discriminate on price against rivals, made no effort to require ocean shippers to carry U.S. exports, and did nothing to stop exorbitant price-gouging and unconscionable fees.

Supply Chain Fixes, Energy Transition Take Major Steps Forward – The American Prospect