Chinese Manufacturer to Build Containership Due to Supply Chain Issues
Big-box retailers and freight companies charteredships to manage the challenges in the supply chain....
Big-box retailers and freight companies chartered ships to manage the challenges in the supply chain during the pandemic while one U.S. furniture company sued carriers complaining of lack of capacity, but a Chinese manufacturer is taking delivery of its furniture to a new level. Best known for its standing desks and other ergonomic solutions for home and office, Loctek with manufacturing in Shenzen, China, and offices in California is planning to build its own containership.
As first reported by Tradewinds, the company reported in a filing to the Shenzen stock exchange that its board has “deliberated and approved” the investment in the construction of a containership. They reported that “after research and the decision of the board,” the company had planned to charter or build a containership.
“In order to further enhance the company's competitiveness and accelerate the company's overseas business development, the company plans to sign a 1,800 TEU containership construction contract with a domestic first-class shipyard,” Loctek reports in its stock exchange filing.
The contract for the construction is going to Huanghai Shipbuilding Co., located in Shandong Province, China. The furniture company reports the cost at $32.8 million for the vessel and says it will be delivered by March 31, 2023.
Additional details on the vessel were not reported in the filing, but in June 2021 Huanghai Shipbuilding received a contract from Briese Schiffahrts to build four 1,800 TEU containerships. Those vessels, which have the same capacity, are reported to be 564 feet in length with a deadweight of 24,000 tons. Driven by a low-speed two-stroke diesel engine and fixed-pitch propeller, the German vessels will have an operating speed of 18.5 knots.
Loctek cited several factors in its decision to pursue its containership. The company highlighted since the onset of the pandemic, that the efficiency of ports in overseas countries has been generally low as well as issues of security, timeliness, reliability, and the economics of the supply chain which have all been severely challenged.
The company reports that its international business is in the period of transformation and development from OEM to overseas brand. “The trend of online consumption of consumer goods through e-commerce continues to strengthen, and the company's online business has grown steadily and rapidly. In order to further improve the user experience of fast arrival of e-commerce shopping and shorten the delivery cycle,” Loctek’s board agreed to the investment in the containership. They did not address if they will operate the ship or have it run by a major shipping company to transport their products or to which ports they plan to sail.
Faced with similar challenges, big-box retailers ranging from Home Depot to Costco and Dollar Tree as well as manufacturers for Walmart all chartered vessels in 2021 to move merchandise from China to the United States. Amazon was using general cargo ships to bring containers it purchased to U.S. ports including Houston and recently FedEx launched a shipping service offering to transport containers on a chartered ship as well as bring its own boxes to Port Hueneme, California.
Smaller manufacturers have reported difficult times finding space and accused the shipping companies of not honoring long-term agreements. In August 2021, Pennsylvania furniture manufacturer MCS Industries filed a complaint with the Federal Maritime Commission against MSC and Cosco accusing them of violating the 1984 US Shipping Act by not honoring terms of their contracts and not making space available for the company’s merchandise. Other manufacturers have also filed complaints with the FMC regarding the business practices, the lack of capacity, and fees being charged by a range of carriers.