Stephanie Loomis had hoped the chaos besieging the global supply chain would subside. Floating traffic blocks ports. The increasing costs of freight transport. The resulting shortages of goods. It all seemed like an unpleasant memory confined to the Covid-19 pandemic.
No chance.
As head of ocean freight for the Americas at Rhenus Logistics, a Germany-based company, Ms. Loomis spends her days negotiating with international ocean carriers on behalf of customers transporting products and parts around the world. In recent months, it has seen freight prices soar as a series of disruptions roiled the seas.
Late last year, Yemen’s Houthi rebels began shooting at ships entering the Red Sea en route to the Suez Canal, a vital artery for ships sailing between Asia, Europe and the east coast of the United States. This prompted ships to avoid the waterway, preferring to sail long distances around Africa, lengthening their journey by up to two weeks.
Then, a severe drought in Central America caused water levels in the Panama Canal to drop, forcing authorities to limit the number of ships passing through this crucial canal for international trade.
In recent weeks, dockworkers have threatened strike action on the U.S. East and Gulf coasts, while longshoremen at German ports have cut shifts in search of better pay. Canada’s rail workers are on the verge of a walkout, jeopardizing goods moving across North America and threatening supplies at major ports like Vancouver.
Intensifying upheaval in the shipping industry is prompting carriers to raise rates while raising the specter of a water-related gridlock that could once again threaten retailers with product shortages during the crucial shopping season. Holidays. These disruptions could also exacerbate inflation, a source of economic anxiety driving the U.S. presidential election.
If supply chain disruptions due to the pandemic have proven anything, it’s this: Problems, regardless of location, tend to spread widely.
A container full of chemicals that arrives late at its destination causes a production delay for factories waiting for those ingredients. Ships stuck in ports disrupt the flow of goods, clogging warehouses and putting pressure on the trucking and rail industries.
“I now affectionately call the market ‘Covid junior,’ because in many ways we are back to where we were during the pandemic,” Ms. Loomis said. “Everything restart.”
Since October, the cost of shipping a 40-foot shipping container from China to Europe has risen from an average of about $1,200 to about $7,000, according to data compiled by Xeneta, a shipping company. freight analysis based in Norway. That’s well below the peak of $15,000 reached in late 2021, when supply chain disruptions were at their height, but it’s about five times the prices that prevailed in the years before the pandemic.
Rates for shipping goods across the Pacific were multiplied by similar proportions. It now costs more than $6,700 to transport a 40-foot container from Shanghai to Los Angeles, and almost $8,000 from Shanghai to New York. Last December, these costs approached $2,000.
“We haven’t reached the peak yet,” said Peter Sand, Xeneta’s chief analyst.
Importers who rely on shipping lament the return of another source of distress they suffered during the pandemic: carriers frequently cancel confirmed reservations, while demanding special processing fees and increased service fees as a condition to get containers onto ships.
“It’s all a struggle to get containers,” said David Reich, whose Chicago company, MSRF, assembles gift baskets for Walmart and other giant chains. “It’s frustrating.”
Alarmed by the growing threats to shipping, Mr. Reich is accelerating his plans to stockpile goods for the holiday season. It is pressuring its suppliers in China to make its food packaging more quickly, anticipating shipping delays.
Mr. Reich has contracts with two shipping carriers to move four containers a week from China to Chicago at prices less than $5,000. Yet he was recently informed that carriers were imposing increasing “peak season surcharges” that could add as much as $2,400 per container, he said.
And even at these prices, carriers often say they have no space on their ships, he lamented. He fears having to resort to booking on the so-called spot market, where prices fluctuate, now reaching $8,000.
In an emailed statement, the World Shipping Council, an industry trade association, said that “spot rates reflect demand and supply in a competitive global market, and the vast majority of container traffic is moves according to rates negotiated within the framework of long-term contracts.
Experts dispute this claim, pointing out that container shipping is characterized by a lack of competition on major routes, allowing carriers to significantly raise prices when the system is strained.
Three major carrier alliances control 95 percent of container traffic between Asia and Europe and more than 90 percent between Asia and the U.S. East Coast, according to the International Transport Forum, an intergovernmental organization. in Paris which has 69 member countries, including China. and the United States.
During the worst disruptions of the pandemic, when extreme delays and product shortages prompted retailers to pay carriers as much as $28,000 to transport individual containers across the Pacific, the industry posted record profits.
New Balance, the athletic shoe brand, is partly cushioned by its reliance on factories in the United States as well as its contracts with carriers that set prices. Yet in some cases the company was forced to pay spot market rates that rose sharply, “like during the peak years of the pandemic – more than 40% month over month,” said Dave Wheeler, chief operating officer, in an email.
Carriers have canceled some scheduled sailings, reducing capacity, Mr. Wheeler added. “We expect a storm brewing in 2024 regarding reliability and pricing risks. »
The most immediate cause of the recent increase in shipping prices is the targeting of ships by the Houthis, who support Palestinians under attack by Israeli forces.
This threat appears to be intensifying, as Iran-backed Houthi rebels increase the frequency of their attacks, supplementing missile strikes with maritime drones – essentially ship-based boats loaded with explosives and controlled remotely.
In recent weeks, such attacks have sunk two ships, including a Greek ship carrying coal.
With container traffic through the Suez Canal down to a tenth of its usual throughput, most ships traveling between Asia and Europe now bypass Africa, which means using more fuel.
At the same time, carriers have concentrated their fleets on the most lucrative routes, those connecting destinations like Shanghai and the Dutch port of Rotterdam, Europe’s busiest. This forced goods bound for other locations to stop to be loaded and reloaded at major hubs called transshipment ports.
The largest such ports, including Singapore and the Sri Lankan capital Colombo, are now overwhelmed with incoming ships. Ships must wait at anchor for up to a week before arriving at the docks.
Given the disruption and additional costs, some increase in shipping rates is inevitable. But those who rely on the industry argue that carriers are raising prices beyond recouping their own additional costs.
“Carriers have learned a very valuable lesson during the pandemic,” Ms. Loomis said. “They will manipulate capacity and increase freight rates. »
The biggest concern is that floating traffic jams could become a self-fulfilling prophecy. As importers absorb the reality of rising shipping prices and port congestion, they are ordering early. This could lead to an increase in freight entering major ports like Los Angeles, Newark and Savannah, Georgia, exceeding the capacity of trucks, railroads and warehouses.
The prospect of a rail workers’ strike in Canada is prompting goods bound for Vancouver to divert to Southern California, scene of the worst traffic jams during the pandemic disruptions.
In Tennessee, F9 Brands, an importer of cabinets and flooring products, has increased its orders in the face of longer delivery times, said Jason Delves, the company’s chief executive.
The company transports cabinets from factories in Vietnam, Thailand and Malaysia to the Port of Savannah and then to its warehouses in Tennessee by rail and truck. Typically this trip lasts six weeks. “Now you are extending the deadline to more than eight weeks,” Mr Delves said.
Added to this concern is the fact that no one knows how long the latest disruption will last or how it will play out.
Panama Canal restrictions have mostly been lifted as the rainy season replenishes water supplies. But climate change increases the risks of future droughts.
The consequences of the pandemic have been sufficiently difficult to grasp, with large miscalculations regarding the impacts on demand for manufactured products. But everyone understood that pandemics eventually end.
In contrast, the Houthi strikes and their effects on the Suez Canal involve enormous geopolitical variables that make predictions difficult.
“It’s a very complex situation, and it seems limitless,” said Mr. Sand, the Xeneta analyst. “There is no clear solution in sight.”
News Source : www.nytimes.com
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