Sen. Elizabeth Warren (D-Mass.) sent a letter to the nine shipping companies that comprise the three major ocean carrier alliances, expressing concern that the companies are exploiting antitrust exemptions and driving up prices.
In the letter, Warren called out the companies for what she claimed were exacerbated shipping cost increases and supply chain problems, hurting consumers and small businesses and driving inflation throughout the economy. She also highlighted that the container shipping companies are raking in record profits, although she didn’t cite similar profitability disparities among delivery companies such as FedEx Corp. and UPS.
An analysis by Sourcing Journal of profits in the shipping sector showed ocean carrier giant A.P. Moller-Maersk reported record earnings for fiscal 2021, with revenue up 55 percent to $61.8 billion. The CMA CGM Group reported 2021 revenues increased 78 percent to $56 billion.
Comparatively, large ground and air shipping companies reported somewhat more moderate profits. FedEx this month reported net income for its fiscal third quarter ended Feb. 28 had increased 23.3 percent to $1.1 billion, while last month UPS posted fourth-quarter 2021 revenue of $27.8 billion, an 11.5 percent increase over the fourth quarter of 2020.
Warren noted that earlier this month President Biden announced a new administration-wide effort to crack down on profiteering by shipping companies, including the formation of a new Federal Maritime Commission-Department of Justice task force to investigate ocean shipping lines for potential violations to the Shipping Act and other U.S. laws.
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“I am deeply concerned that container shipping companies have been taking advantage of their exemption from antitrust rules to rake in record profits while imposing grievous financial harm on consumers and the economy,” Warren wrote. “Shipping companies have experienced their best year on record, raking in a combined $190 billion in profits.”
In the letter, she asked the shipping companies for information on their shipping rates, their profits and profit margins, and their agreements with competitors that result in higher shipping costs, even though as publicly traded companies, as most or all are, that information is generally available.
High shipping costs imposed by container shipping companies are a major contributor to high inflation, Warren said. She cited a Bloomberg report that said the spot rate for a 40-foot container or equivalent unit (FEU) to the U.S. from Asia topped $20,000 last year, including surcharges and premiums, up from less than $2,000 a few years ago, and was recently hovering near $14,000.
Drewry’s World Container Index (WCI) for the week ended March 24 decreased 4.1 percent $8,470.45 per FEU, but was still 74 percent higher than a year ago. The average WCI for year-to-date was $9,285 per FEU, $6,130 higher than the five-year average of $3,156. As for the Asia to United State route, Drewry reported freight rates on rates on Shanghai-Los Angeles fell 2 percent for the week to $9,926 per FEU, while rates on Shanghai-New York were flat.
“Tight container capacity and port congestion mean that longer-term rates set in contracts between carriers and shippers are running an estimated 200 percent higher than a year ago, signaling elevated prices for the foreseeable future,” Warren wrote. “These price surges allow companies to pass higher costs on to customers and push out smaller businesses, which cannot compete with larger companies for dwindling ship space. This has affected all corners of the economy, inflating prices for the cost of food, durable goods, and other essential needs.”