A lengthy, but very interesting report from ProPublica suggests they are. Here’s how it begins.
Last fall, a company called One Banana loaded 600,000 pounds of the fruit from its plantations in Guatemala and Ecuador onto ships bound for the Port of Long Beach in California. Once they arrived, the bananas, packed in refrigerated containers, were offloaded by cranes for trucking to a nearby warehouse, where the fruit would be sent to supermarkets nationwide.
But in the midst of a global supply chain crisis, none of the trucking companies the importer normally worked with were willing to come and get the containers.
As the bananas sat at the marine terminal, a logistics specialist for One Banana scrambled, contacting more than a dozen trucking firms.
With each passing hour, the bananas grew closer to spoiling.
“We need to pull out 15 containers from Long Beach Port,” the logistics specialist wrote in an email to one firm. “Please let me know if you could help me with this.”
A trucking company finally said it could — but only if One Banana first paid $12,000 per container on top of already higher transportation costs.
This is where the plot ripens.
If One Banana were to accept that additional fee and pass the full cost along to consumers, the bananas could go from 60 cents a pound to 90 cents a pound. That alone might not break your budget, but rising prices of everyday items are adding up to the worst inflation in 40 years. Many of the causes may seem obvious. Massive consumer spending and pandemic shutdowns have strained supply chains. The war in Ukraine is driving up the price of gas. But the extra fees for transporting bananas — and countless other products — are a hidden and mind-boggling source of inflation controlled by ocean carriers.
Simply put, as ballooning costs hit the wallets of American families, the global ocean shipping industry is enjoying its most profitable period in recent history. In the first quarter of 2022, the biggest carriers’ operating margins hit 57%, according to one industry research firm, after hovering in the single digits before the pandemic.
The hauler that wanted $12,000 per container to move the bananas told the One Banana logistics specialist that it needed the money to cover a slew of fees the ocean carriers were tacking onto freight bills. Hapag-Lloyd, the German shipping giant that owned the containers the bananas were sitting in, had become particularly notorious in the freight industry, leading to multiple complaints to the Federal Maritime Commission.
In normal times, the fees, known as detention and demurrage, make a lot of sense. Importers who don’t pick up their stuff on time get charged demurrage for storage at the marine terminals. Truckers who don’t return an empty container on time pay late fees, or detention. The purpose of the penalties is to incentivize the various players in the supply chain to keep goods flowing.
Most of the imported goods Americans buy are carried by ship and unloaded at ports like Long Beach for transportation by truck or rail toward their final destination.
But as supply chains snarled last year, the ports of Long Beach and Los Angeles ran out of room and became clogged with shipping containers that importers, often big-box retailers and brands, weren’t able to retrieve. Surrounding truckyards and streets were flooded with empty containers, temporarily dumped there by trucking companies that couldn’t get appointments to return them to the ports.
Hapag had made it “extremely difficult” to return empty containers, the trucking company said, and it was often left holding them for a month, all while Hapag continued to charge the firm $400 a day for each container that wasn’t returned on time. One trucking company that the importer contacted said it almost had to shut down temporarily because all the chassis — the steel frames with wheels that attach to trucks — that it needed to pull new loads from the ports were sitting under 70 empty containers that Hapag refused to take back.
Essentially, One Banana and several trucking companies said Hapag had created the situation it was now profiting from.
“It’s like renting a car at the airport, and when you try to return it, they’re saying, ‘No, you have to hang on to it for us, and we’re gonna continue to charge you,’” said Fred Johring, the CEO of one of the trucking firms, Golden State Logistics.
Hapag declined to comment, but in filings with the Maritime Commission, it denied One Banana’s allegations that the fees were unfair.
There’s much more at the link, covering many other examples of how shippers appear to be holding their customers hostage and charging them excessive fees.
This is one of the primary causes of inflation – companies charging as much as they think the market will bear, whether or not there’s any economic justification for it. To me, it’s the unacceptable face of capitalism, greed running rampant. Whatever these companies charge, their customers will be forced to pay; and they’ll try to recover those costs from their customers in turn, because they can’t afford to pay them out of pocket. Eventually, all those costs, ballooning ever higher, come to rest in the retail price of the product, which you and I must pay – or do without the goods and services we need.
You can see these excess profits in action in the balance sheets of big shippers. For example, at Maersk, one of the largest shipping lines in the world, revenues increased 55% in a single year, from $39.7 billion in 2020 to $61.8 billion in 2021. Profits at its Ocean arm rose from $29.2 billion in 2020 to $48.2 billion in 2021. That’s a heck of a profit margin compared to overall revenue. Any company in the world would absolutely love a balance sheet like that! Guess who paid for those profits? Ultimately, you and I did, because we bought the products that were shipped on Maersk ships and using Maersk services, and the costs companies paid to use Maersk were passed on to us.
When you read the whole of that ProPublica article, you’ll understand how Maersk and every other shipping line and freight handler are basically ripping us off for every penny they can squeeze out of us. In the process, they’re damaging our entire economy – but they don’t care. That’s raw, unfettered capitalism in action. They’re going to charge what the market will bear until it can’t bear it any longer; then they’re going to take their excess profits and use them for their and their shareholders’ advantage, while reluctantly and grudgingly reducing what they charge us, as slowly as they can.
Our economic mess is, indeed, the result of catastrophic mismanagement by governments all over the world; but it’s not only governments that are at fault. A whole lot of companies must also bear their share of the blame.