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Top US Shippers: Toy import demand outpacing shipping capacity
Source
JOC
Post Date
06/07/2021

Growth in US toy imports surged to a three-year high in 2020 and is expected to remain strong throughout 2021, based on industry demand data and sales projections from leading manufacturers in the sector.

Undeterred by a first-quarter lull caused by the COVID-19 pandemic, tariffs on Chinese-made goods, and global ocean capacity constraints, containerized US toy imports rose 3.5 percent year over year to nearly 1.1 million TEU in 2020, according to data from PIERS, a sister product of JOC.com within IHS Markit. That growth was led by the outdoor and sporting equipment and games segments, which rose 35.1 percent and 78.3 percent, respectively, as consumers looked for ways to entertain themselves inside and outside their homes during lockdowns.

Total toy sales in the US increased 16.7 percent to $32.6 billion last year, according to industry trade group The Toy Association, which indicates toys are getting smaller and more expensive as demand rises.

Sector observers say they expect sales growth in 2021 to be strong, though not quite as robust as in 2020. According to a September 2020 report from Research and Markets, Worldwide Toy Industry to 2025, the global toy market is projected to grow at a 1.4 percent compound annual growth rate until 2025. North America, the leading regional market, should expect continued steady low single-digit percentage growth during the same period after growing imports by an average of 2.6 percent over the last five years, according to PIERS.

But that rosy picture is clouded by the ongoing impacts of port congestion on transit times through the ports of Los Angeles and Long Beach, through which nearly half of all US toy imports arrive, according to PIERS. Despite the tariffs and congestion issues, the Southern California gateway handled 47.4 percent of all toy imports in 2020, up from 45.6 percent in 2019.

Most toy importers — particularly those moving smaller volumes — simply are not set up to use US East Coast or Gulf Coast gateways due to the location of their distribution centers, Jeff Bergman, managing director of the Toy Shippers Association, told JOC.com.

“That makes it very difficult for the smaller importers to use nate ports,” Bergman said. “Larger importers have looked at switching to US East Coast disge whenever possible to secure additional space and avoid delays.”

‘Challenging’ conditions persist

Bergman said he anticipates all container lines will ge a premium through the summer and fall to get containers loaded due to the backlog. He said most carriers are sticking to a formula of dividing importers’ minimum quantity commitment (MQC) by 52 weeks for their weekly allocations.

“This does not work for most importers, especially toy importers,” due to seasonal fluctuations in demand, Bergman said. “The weekly allocation will be the biggest challenge to overcome.”

Bergman added that freight rates agreed to in annual trans-Pacific service agreements “have increased dramatically from last year’s contracts. Premiums have been required with some carriers, but not all carriers, to get loaded.”

The Trump administration tariffs on imports from China also have failed to put a dent in the country’s role as the chief source of US toy imports, producing 84.9 percent of all toys imported into the US last year, up from 83.5 percent in 2019. Vietnam, the second-largest supplier of US toy imports, saw its share of the market rise from 2.9 percent in 2019 to 3.9 percent in 2020.

Meanwhile, an acceleration of e-commerce during the pandemic has unquestionably aided toy makers and their retail partners.

Ynon Kreiz, CEO of Mattel, said in an April 23 earnings call that the toy maker is prioritizing e-commerce after online sales jumped 58 percent year over year in the first quarter, representing 28 percent of the company’s total sales during the quarter.

“The strength of our performance is also evident when comparing our 2021 results to 2019 before COVID, with net sales being higher by 27 percent in the first quarter of 2021 versus the first quarter of 2019,” Kreiz added, specifically pointing to Mattel’s “world-class supply chain” as a factor in the company’s healthy overall growth.

Mattel CFO Anthony DiSilvestro said the company hasn’t seen any material impact to its business from congestion in Southern California, “which we’ve been dealing with since the fourth quarter of last year,” but its fixed costs increased during the first quarter, “driven by increases in materials and logistics.”

Bergman said he’s warned members of the Toy Shippers Association to brace themselves for a continuation of the challenging market conditions seen in 2020.

“Carriers do not have sufficient capacity to meet the unprecedented demand,” he said. “Premiums will be necessary to get containers loaded through the of the year. Carriers will not be able to handle the traditional surge in peak cargo. Our guidance has been to accept any container size that’s made available and prioritize containers above all else.”

Bergman added that a rolling six- to eight-week fore is mandatory for toy importers, and that they should explore all options and routes “to get your container on US soil.”


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