The shipping crisis is getting worse. In this image, cargo containers are stacked at Yantian Port on June 22 in Shenzhen, China. (STR / AFP / Getty Images)
ATLANTA: The vast network of ports, container ships and transport companies that transport goods around the world is very tangled and the cost of shipping is skyrocketing. This is worrying news for retailers and holiday shoppers.
After more than 18 months of the pandemic, the disruption of global supply chains is getting worse, causing a shortage of consumer products and making companies more expensive to ship goods where they are needed.
Unresolved issues and the emergence of new issues, including the delta variant, are making buyers face higher prices and fewer options this holiday season. Companies like Adidas, Crocs and Hasbro are already warning of alterations as they prepare for the crucial end-of-year period.
“Pressures on global supply chains have not abated and we do not expect them to occur any time soon,” said Bob Biesterfeld, CEO of CH Robinson, one of the world’s largest logistics companies.
The latest hurdle is in China, where a terminal in Ningbo-Zhoushan port south of Shanghai has been closed since Aug. 11 after a dock worker tested positive for COVID-19. Major international shipping lines, including Maersk, Hapag-Lloyd and CMA CGM, have adjusted schedules to avoid port and warn customers of delays.
Partial closure of the world’s third busiest container port is disrupting other ports in China, extending supply chains that were already suffering from recent problems at Yantian Port, continuing container shortages, coronavirus-related factory shutdowns in Vietnam and the persistent effects of Suez. Channel blocking in March.
Shipping companies expect the global crisis to continue. This massively increases the cost of moving the load and could add to the upward pressure on consumer prices.
“We currently expect the market situation to only decrease in the first quarter of 2022 at the earliest,” Rolf Habben Jansen, CEO of Hapag-Lloyd, said in a recent statement.
According to London-based Drewry Shipping, the cost of shipping goods from China to North America and Europe has continued to rise in recent months, following a rebound earlier this year.
Pressures on global supply chains have not eased and we do not expect them to occur any time soon.
–Bob Biesterfeld, the CEO of CH Robinson
The company’s World Container Index shows that the compound cost of shipping a 40-foot container on eight major east-west routes reached $ 9,613 a week through Aug. 19, up 360 percent from a year ago. .
The biggest price jump occurred along the route from Shanghai to Rotterdam in the Netherlands, with the cost of a 40-foot container rising 659% to $ 13,698. Container shipping prices on the routes from Shanghai to Los Angeles and New York have also jumped.
“The current historically high transport rates are caused by the fact that there is unmet demand,” said Soren Skou, general manager of container shipping giant Maersk, in a earnings call this month. “There just isn’t enough capacity,” he added.
Port congestion
The closure of the terminal in Ningbo will be added to the bottlenecks stemming from the June closure of Yantian, a port about 50 miles north of Hong Kong, after coronavirus infections were detected among dock workers.
Although the partial reopening of Yantian took a few days, the return to normal services took almost a month to achieve, according to S&P Global Market Intelligence Panjiva, as congestion spread to other ports.
This poses problems for retailers and consumer goods companies trying to replenish inventories toward the crucial end-of-year holiday shopping season. “The closure in Ningbo is now especially sensitive, as it may hold back exports during the high season of deliveries to the United States and Europe that normally arrive from September to November,” S&P Global Panjiva said in a research note on 12 d ‘August.
Drewry Shipping said Friday that congestion in nearby ports of Shanghai and Hong Kong is intensifying and spreading elsewhere in Asia, as well as in Europe and North America, “particularly on the west coast” of the United States. .
About 36 container vessels are anchored in adjacent Los Angeles and Long Beach ports, according to a report on Thursday by the Southern California Marine Exchange.
This is the highest figure since February, when 40 container ships were expected to enter. Normally, there would be only one or zero container vessels anchored, according to the Marine Exchange.
Congestion in California is beginning to spread to “almost every U.S. port,” according to CH Robinson’s Biesterfeld. “The chances of your boat arriving on time is about 40%, when it was 80% this time last year,” he told CNN Business.
The delay in ports will have an undulating effect on stranded warehouses and extended capacity by road and rail. Logistics networks have been operating at full capacity for months, thanks to stimulus-driven demand led by American consumers and the recovery in manufacturing. The shortage of truck drivers in the United States and the United Kingdom has only exacerbated supply disruptions.
U.S. imports in March and May exceeded levels seen in October 2020, typically the peak of the shipping season, said Eric Oak, a supply chain analyst at S&P Global Panjiva.
“This means the logistics facilities have been extended for most of the summer,” he added.
Not only ports are under pressure. Air terminals receive increasing quantities of goods as companies resort to alternative methods of transporting their goods. At some of the largest airports in the United States, such as Chicago, there are delays of up to two weeks for claiming cargo, according to Biesterfeld.
Efforts to contain outbreaks of COVID-19 have recently disrupted traffic at Shanghai Pudong and Nanjing airports in China.
Retailers are preparing for the impact
“You name almost anything and it looks like something is missing,” Biesterfeld added. “Retailers struggle to replenish inventory as quickly as they sell, let alone prepare for holiday demand.”
According to an analysis by S&P Global Panjiva, supply chains were discussed on nearly two-thirds of the 7,000 corporate profit calls worldwide in July, up from 59% in the same month last year.
Consumer goods producers are taking drastic measures to meet demand, such as changing where products are made and moving them by plane instead of by boat, but companies like shoemaker Steve Madden say they are already losing sales because they just don’t have enough merchandise.
The company has moved half of the production of its female range to Mexico and Brazil from China in an attempt to shorten delivery times.
“As for the supply chain … we could talk about it all day. There are challenges around the world,” CEO Edward Rosenfeld said in a profit call last month. “There is port congestion in both the US and China. There are outbreaks of COVID in factories. There are challenges in getting containers. We could go on and on.”
It is one of the leading clothing brands affected by factory shutdowns in Vietnam over the past month. S&P Global Panjiva data show that nearly 40% of the volume of goods imported into the United States by sea during the twelve months to July came from the Southeast Asian country.
Adidas CEO Kasper Rorsted said the sportswear company will not be able to fully meet the “strong demand” for its products in the second half of the year due to shutdowns, despite shifting production to other regions.
Supply chain difficulties have been “bringing (a) significant delays and additional logistical costs, mainly because we have used more air transport,” he said in a recent earnings call.
Andrew Rees, CEO of Crocs, said transit times from Asia to most of the company’s major markets are about twice what they were historically. “This has been the case for a long time and we look forward to (living) with it,” he told investors last month.
To ensure product availability during the holiday season, Hasbro, which manufactures Monopoly and My Little Pony, said it is increasing the number of ocean carriers it works with, using more ports to expedite deliveries and getting more products before several countries.
For consumers, the supply chain crisis is likely to mean higher prices. Hasbro, for example, raises prices to offset rising costs for goods and raw materials. The company expects its shipping costs to be on average four times higher this year than last year, according to chief financial officer Deborah Thomas.
Buyers should also be prepared during longer than normal delivery times and may need to have several different gift ideas up their sleeve.
“As we’ve been forecasting for months, shoppers will see some bare shelves during the holidays,” Biesterfeld said. “And if you buy most of your gifts online, do it soon. The delivery time can be four to six weeks.”