Freight Rate Fluctuations and FMC Rate Hike Reports
On August 23, the Shanghai Containerized Freight Index (SCFI) reported a 5.6% drop to 3,097.63 points, reversing the previous week’s slight uptick. Freight rates on major routes to Europe, the Mediterranean, and the U.S. saw declines, with rates to the West Coast and East Coast of the U.S. falling by 9.51% and 8.08% respectively, while European and Mediterranean routes dropped by 4.56% and 2.63%.
Industry experts note that despite attempts by shipping companies to raise rates on U.S. routes, the effort was unsuccessful, leading to further rate reductions. The market has witnessed significant discrepancies in quotes among shipping companies competing for cargo, resulting in chaotic pricing, especially for West Coast routes. While some alliance carriers maintain rates above $6,000, others have introduced promotional rates around $4,600, highlighting extreme market volatility.
Adding to the uncertainty, East Coast port workers in the U.S. may strike on October 1, prompting shipping companies to plan a $4,000 rate increase per 40-foot container on both the West and East Coast routes, reporting these changes to the Federal Maritime Commission (FMC). This adjustment could raise West Coast rates by approximately 67% and East Coast rates by about 50%. Other companies are likely to follow suit, potentially driving rates even higher.
The potential strike is tied to new contract demands from the International Longshoremen’s Association (ILA), which include a $5 per hour wage increase annually, potentially raising dock workers’ maximum wages by 76% over six years. Shipping companies are resisting these demands, and strikes typically lead to rate hikes. With the Biden administration likely to support the unions, the probability of a strike has increased. Although the strike duration is expected to be short, shipping companies may seize the opportunity to rapidly raise rates.
Amazon Updates Receiving Configuration Fees
Many sellers have recently observed their inventory being assigned to remote warehouses, significantly increasing shipping costs. Specifically, warehouses ABQ2 and PSC2, located far from major logistics hubs, lead to longer delivery times and higher expenses. Even attempts to use expedited or sea freight services for last-mile delivery have not significantly lowered logistics costs, squeezing profit margins.
Amazon has updated its receiving configuration fee policy, now requiring sellers to provide at least five cartons of identical products to waive the configuration fee. The previous approach of sending “the first five cartons with the same SKU and the sixth carton mixed with other SKUs” is no longer accepted.
These additional receiving configuration fees have reduced profits for many sellers, particularly those dealing with low-margin products where FBA fees, promotional discounts, and advertising costs already strain profitability. Sellers should also note that late shipments exceeding 30 days will incur extra configuration fees, and low shipment volumes relative to the created shipment count may negatively impact performance metrics.
Inventory Requirements for Amazon Fall Promotions
Amazon U.S. has announced deadlines for fall promotion inventory. To ensure Prime delivery eligibility during the promotion season, sellers must have their fall inventory in place by September 13, and inventory for Black Friday and Cyber Monday must be ready by October 19.
With increasing warehouse pressure, especially due to slow receiving on the West Coast, the inventory preparation peak in September is expected to further strain warehouse capacities. To avoid delays, sellers should ship as early as possible to ensure their products are listed and participate in the promotions on time.
Wakool Transport’s Response Strategy
1. Managing Freight Rate Fluctuations and Market Volatility
Flexible Capacity Scheduling: Wakool Transport offers flexible capacity scheduling to help clients complete necessary transport before rate increases, thus reducing costs.
Market Monitoring and Alerts: We provide market monitoring services to track rate changes in real-time, offering proactive advice to help clients make informed decisions amid market volatility.
2. Addressing Amazon’s Increased Receiving Configuration Fees
Optimized Logistics Solutions: Wakool Transport delivers customized logistics solutions in response to Amazon’s receiving policy changes, optimizing packaging and transport routes to minimize additional costs caused by remote warehouse assignments.
Batch Shipping Strategy: We assist clients in developing batch shipping strategies to comply with Amazon’s new policy requirements, avoiding high receiving configuration fees and ensuring timely delivery.
3. Preparing Inventory for Amazon Fall Promotions
Advance Inventory and Receiving Services: Wakool Transport offers advance inventory services to help clients complete stock preparation before peak periods, ensuring timely participation in fall promotions.
Accelerated Delivery: Utilizing Wakool Transport’s robust logistics network on the West Coast, we expedite delivery, avoiding warehouse delays and ensuring timely product listing for promotions.
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