“The pressures on global supply chains have not eased and we don’t expect them to do so anytime soon,” said Bob Biesterfeld, CEO of CH Robinson, one of the world’s largest companies. logistics to the world.
Shipping companies expect the global crisis to continue. This massively increases the cost of transporting goods and could add to the upward pressure on consumer prices.
“We currently expect the market situation to improve only in the first quarter of 2022 at the earliest,” Hapag-Lloyd Managing Director Rolf Habben Jansen said in a recent statement.
The cost of shipping goods from China to North America and Europe has continued to rise in recent months, after peaking earlier in the year, according to data from Drewry Shipping, based in London.
The company’s global container index shows that the composite cost of shipping a 40-foot container on eight major east-west routes reached $ 9,613 in the week to August 19, up by 360% compared to a year ago.
The biggest price hike came along the route from Shanghai to Rotterdam in the Netherlands, with the cost of a 40-foot container climbing 659% to $ 13,698. The prices of container transport on the routes from Shanghai to Los Angeles and New York have also jumped.
“The current historically high freight rates are due to the fact that there is unmet demand,” Soren Skou, CEO of container shipping giant Maersk, said in a earnings call this month. “There just isn’t enough capacity,” he added.
The closure of the Ningbo terminal will add to bottlenecks resulting from the June closure of Yantian, a port about 50 miles north of Hong Kong, after coronavirus infections were detected among dockworkers.
While a partial reopening of Yantian only took a few days, a return to normal services took nearly a month, according to S&P Global Market Intelligence Panjiva, as congestion spread to other ports .
This creates problems for retailers and consumer goods companies trying to restock their inventory as the crucial year-end shopping season approaches. “The closure of Ningbo is now particularly sensitive because it may block exports for the peak season of deliveries to the United States and Europe which typically arrive from September to November,” S&P Global Panjiva said in a research note on August 12. .
Drewry Shipping said on Friday that congestion at nearby ports in Shanghai and Hong Kong “was skyrocketing” and spreading elsewhere in Asia, as well as Europe and North America, “particularly on the west coast” the United States.
Some 36 container ships are anchored off the adjacent ports of Los Angeles and Long Beach, according to a report released Thursday by the Marine Exchange of Southern California.
This is the highest number since February, when 40 container ships were waiting to enter. Normally there would be only one or no container ships at anchor, according to the Marine Exchange.
Congestion in California is beginning to spread to “just about every port in the [United States]”, according to Biesterfeld of CH Robinson.” The chances of your ship arriving on time are around 40%, up from 80% at the same time last year, “he said at CNN Business.
U.S. imports in March and May exceeded levels seen in October 2020, typically the peak of the shipping season, said Eric Oak, supply chain research analyst at S&P Global Panjiva.
“This means that the logistics facilities have been operating at full capacity for most of the summer,” he added.
It’s not just the ports that are under pressure. Air terminals are receiving increasing amounts of freight as companies turn to alternative methods of transporting their goods. At some of the largest US airports such as Chicago, there are delays of up to two weeks in claiming cargo, according to Biesterfeld.
Efforts to contain the Covid-19 outbreaks recently disrupted traffic at Shanghai Pudong and Nanjing airports in China.
Retailers brace for impact
“Name almost anything and it looks like there’s a shortage of it somewhere,” Biesterfeld added. “Retailers are struggling to replenish their inventory as quickly as they sell, let alone prepare for holiday demand.”
Supply chains were discussed in nearly two-thirds of some 7,000 business earnings calls worldwide in July, up from 59% in the same month last year, according to an analysis by S&P Global Panjiva.
The company has moved half of the production of its women’s range to Mexico and Brazil from China in an attempt to shorten delivery times.
“In terms of the supply chain… we could talk about it all day. There are challenges all over the world,” CEO Edward Rosenfeld said on a conference call last month. “There is port congestion, both in the United States and in China. There are Covid outbreaks in factories. There are difficulties getting containers. We could go on and on.”
It is one of the many big clothing brands hit by factory closures in Vietnam over the past month. S&P Global Panjiva data shows that almost 40% of the volume of goods imported to the United States by sea in the 12 months leading up to July came from the Southeast Asian country.
Adidas CEO Kasper Rorsted said the sportswear company would not be able to fully meet “strong demand” for its products in the second half of the year due to closures, despite shifting production to other regions.
The difficulties in the supply chain were “main [to] significant delays and additional logistics costs, especially as we rely more on air freight, ”he said in a recent call for results.
Andrew Rees, CEO of Crocs, said transit times from Asia to most of the company’s major markets are about double what they were historically. “This has been the case for some time and we expect [to] live with that, ”he told investors last month.
To ensure product availability during the holiday season, Hasbro, which makes Monopoly and My Little Pony, said it was increasing the number of shipping carriers it worked with, using more ports to speed up deliveries and stock up on supplies. earlier in products in several countries.
For consumers, the tightening of the supply chain will likely translate into higher prices. Hasbro, for example, is raising prices to offset rising freight and raw material costs. The company predicts that its spending on ocean freight will on average be 4 times higher this year than last year, according to CFO Deborah Thomas.
Buyers should also be prepared for longer than normal delivery times and may need several different gift ideas up their sleeves.
“As we’ve predicted for months, buyers are going to see bare shelves during the holidays,” Biesterfeld said. “And if you buy most of your gifts online, do it early. The delivery time can be four to six weeks.”