Supply crisis pushes Walmart and rivals to lease their own ships

LOS ANGELES, October 7 (Reuters) – The Flying Buttress once crossed the oceans carrying vital goods like grain to all corners of the world.

Now he’s carrying a different treasure: Paw Patrol Movie Towers, Batmobile Transformers, and Baby Alive Lulu Achoo Dolls.

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The dry bulk freighter has been put to the service of retail giant Walmart, which charters its own ships in a bid to tackle global supply chain disruptions that threaten to torpedo the landmark holiday season of the retail industry.

“Chartering ships is just one example of the investments we’ve made to move products as quickly as possible,” said Joe Metzger, US executive vice president of supply chain operations at Walmart, who has chartered a number of vessels this year.

The goal is to bypass blocked ports and secure limited ship space at a time when COVID-19, along with U.S.-China trade cuts, equipment shortages and extreme weather, have exposed fragility. supply lines across the globe that we use for everything from food and fashion to drinks and diapers.

RECORD OF CONTAINER SHIPS EXPECTED IN THE UNITED STATES

More than 60 container ships carrying multibillion-dollar clothing, furniture and electronics are stranded outside the Los Angeles and Long Beach terminals, waiting to unload, according to the Marine Exchange of Southern California.

Before the pandemic, it was unusual for more than one ship to be in the queue at U.S. Port Complex No.1, which handles more than half of all U.S. imports.

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Other big players in retail, such as Target, Home Depot, Costco (COT.O) and Dollar Tree, said they are chartering ships to deal with the pandemic slowdown in shipping networks that handle 90% of global trade.

Or, as Steve Ferreira of shipping consulting firm Ocean Audit describes the growing concern: “Containergeddon”.

The traditional lifeline of American retailers from Asia is stuck due to a resurgence of COVID-19 in countries like Vietnam and Indonesia and an electricity supply crisis in China. Grunts in supply coincide with booming demand as consumers spend more on their goods than going out, and the frenzy of festive shopping approaches.

Burt Flickinger, chief executive of retail consultancy Strategic Resource Group, said at least 20-25% of goods stranded on ships are unlikely to arrive on shelves in time to kick off the Black Friday November 26 for the holiday shopping season, a time when retailers make more than a third of their profits.

CONTAINER SHIPPING COST FROM CHINA TO US REACHES HIGH IN SEPTEMBER

ROAD TO GREAT PROFITS

The biggest chains are taking matters into their own hands.

In a typical year, Walmart would have moved these toys from China to Los Angeles in hundreds of 40-foot (12-meter) crates stacked like colorful Lego bricks on gigantic container ships that serve multiple customers.

But 2021 is far from typical. Cargo entering the Port of Los Angeles is up 30% from record levels last year. Trucks and trains cannot remove it quickly enough, leading to traffic jams, port executive director Gene Seroka said, reflecting increased consumer demand.

“It’s like taking 10 lanes of highway traffic and cutting them into five,” Seroka said.

Charter ships that provide valuable cargo space and can bypass container terminals play a vital role in this second pandemic holiday season, especially for urgent goods like Christmas sweaters that won’t sell if they arrive too much. late.

The Flying Buttress, for example, entered Los Angeles waters on August 21. He got stuck in a queue outside the port before bypassing clogged terminals and unloading his cargo at a separately operated bulk cargo dock nearby on August 31, according to Refinitiv’s data and records. ‘shipping.

On this trip, Walmart bypassed the shortage of 40-foot containers typically used for global shipping by switching to larger 53-foot containers that are almost exclusively used to transport goods by truck and rail in the United States. United.

Other companies are playing the shipping game as well, including Home Depot, which said it was “working creatively to get extra capacity.”

The home improvement retailer dodged the Los Angeles traffic jam by sending its charter vessel Great Profit nearly 125 miles south of the Port of San Diego.

On September 15, cranes aboard the ship hoisted “magic witches”, Christmas lights and other Halloween decorations to the docks, said Ferreira, CEO of Ocean Audit, which assists customers of shipment to recover overpayments.

“It’s the home stretch. They are doing whatever it takes” to win in an overheated market, he said of retailers.

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WHY PORT SIZE MATTERS

Still, there is a limit to such workarounds.

Great Profit docked in a terminal that handles everything from sugar to wind turbine blades, but can only accommodate a maximum of 500 containers of one to two ships per month by the end of the year, said Greg Borossay, director of maritime affairs development for the port.

This is because San Diego, like many other US seaports, does not have the huge gantry cranes needed to pick up crates from massive ships. Rail service is equipped for automobiles and other specialty goods. In addition, the roads in the surrounding commercial and residential areas are not prepared for the truck fleets needed to transport thousands of containers to other parts of the country.

“We would have a very unhappy community if we had 3,000 (boxes) coming out of a ship,” Borossay added.

Not all retailers will hire ships to support sales, and other factors could be important in picking potential winners and losers.

Clothing and accessories retailers have seen their inventories dwindle even as sales have accelerated, raising concerns about stockouts, said Jason Miller, associate professor of logistics at Michigan State University’s Faculty of Commerce. .

On the flip side, general merchandise retailers like Walmart and Target have been more successful in keeping inventory at pace with sales, he added.

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PAY $ 20,000 PER CONTAINER

The global supply crisis, however, offers lucrative opportunities for bulk cargo operators; they are benefiting from a record spike in container shipping rates that has pushed freight costs above $ 20,000 per box on the largest liners.

Global container shipping players like AP Moller Maersk and Hapag-Lloyd are bursting with cash thanks to soaring rates. The outline “puts in whatever ships we can find,” said Hapag-Lloyd CEO Rolf Habben Jansen.

Several shipping sources said other companies were buying used container ships of all sizes.

Hong Kong-based Taylor Maritime, which maritime databases say operates the Flying Buttress, did not respond to a request for comment.

Dry Bulk Carriers have a short window of time to prepare decks to secure and safely transport cargo crates. They usually transport goods in cargo holds located below deck.

Genco Shipping & Trading is seeking approval from its ship safety certification body to prepare some of its own dry bulk vessels for container transport.

Genco is not going into container shipping, said CEO John Wobensmith, who called the project “opportunistic.”

Separately, agribusiness giant Cargill has said it plans to use some of the dry bulk vessels it charters to hold containers, if only as a temporary solution, to “ease the bottlenecks. throttling “.

Reporting by Lisa Baertlein in Los Angeles, Jonathan Saul in London and Siddharth Cavale in Bengaluru; Additional reporting by PJ Huffstutter in Chicago; Editing by Pravin Char