Just a couple of years ago, NVOCCs basked in the glow of the growing share of U.S. imports they were handling on behalf of importers. Ocean carriers were slashing vessel capacity to boost freight rates, and shippers in a scramble early in 2010, were forced to turn to non-vessel-operating common carriers to find the space for trans-Pacific imports.
But now, that waxing NVOCC share is on the wane. It dropped to 35% of all U.S. import volumes in the first half of 2013, according to PIERS data. That was down from 39% in 2011, a year after carriers had idled 10% of the global container fleet and were rolling containers at ports of embarkation in China.
NVOs typically buy cargo space from container lines at spot rates, which fluctuate during the year, and resell it to beneficial cargo owners (BCOs) that need more space than they have committed to in annual freight contracts. BCO contract rates are usually several hundred dollars per container below spot rates, so large importers mostly try to nail down space and freight rate commitments with carriers under annual contracts. The decline in the NVOCCs’ import share reflected in the PIERS data is also due to the fact that carriers have become more aggressive in selling their vessel space directly to shippers at a time when they have more than enough capacity to go around.
Another factor in the decline of the NVOCC import share is the BCOs’ increasing use of technology to book and track cargoes, a function they used to leave up to NVOs. One large U.S. importer that previously used NVOs to handle imports on smaller trade lanes not served by their core carriers has since dropped them.
The share of the U.S. import market handled by NVOs is fragmented among many different players, with only a few of them consisting of large global freight forwarders. Expeditors International of Washington, the NVO with the largest import market share, handled only 2.3% of the import volume in the first half of 2013, down from 2.74% in 2011, so it has little pricing power in a market it shares with many small freight forwarders.
This is borne out in the PIERS data. While the overall NVO share of the import market has been declining since 2011, the share handled by the top 20 NVOs has bounced back to 19% this year from 17% in 2011. “The big guys with unlimited capabilities are knocking out the small guys with limited capabilities,” one European logistics provider said.
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