- Allen Czermak
Bottlenecks At Water Ports & Delays In Shipping
Consumers that shop both online and offline have begun to notice that certain items which are typically in stock are not. The reason why many retail orders have been delayed is due to bottlenecks at water ports and shipping delays. They could be waiting on an order and have no idea what is taking so long. Either they will cancel the order or will continue to wait for it to arrive. Either way, it’s been frustrating to the American consumer when shopping at their preferred warehouse club only to find the shelves empty of select household items.
There is always the reason for a stock issue at a local store that can have an impact on what is on the shelves and what is not. However, in the past few months, much of the out-of-stock complications have to do with ship bottlenecks at water ports impacted by the COVID-19 pandemic. The increase in demand for imported products has skyrocketed and the water ports cannot meet the demand to handle all of these shipping containers coming from China and other parts of the world. This has led to cargo ships waiting at water ports on the Western, Eastern, and Southern borders of the United States. Ships are coming into the busiest seaport complexes in the United States, ports in Los Angeles and Long Beach, California, waiting to be unloaded. These ships are currently spending an average of seven-plus days as dock workers struggle to keep up with the huge increase in container imports.
What’s Causing The Delays At The Water Ports In The USA?
It all has to with the COVID-19 pandemic. At the beginning of the pandemic, China’s factories were all shut down and that had a tremendous impact on production. Just a few months later just as China was opening up its factories the United States had shut down. At that point, there was a huge increase in demand for basic household items which we use on a daily basis. This resulted in empty store shelves and large overseas orders from store owners across the United States. Asian Countries were happy to accept new container orders as their own economies were just opening up. Shanghai and Singapore were quickly able to adjust to worker shortages and continue to load containers and sail them off to the United States.
Here we are a few months later with ship bottlenecks at water ports in the United States. States like California still cannot get their COVID-19 numbers under control and that is resulting in worker shortages at the ports. In addition, unions want all workers to be vaccinated prior to returning to work and states cannot meet these demands. With the increase in demand for products due to the pandemic and worker shortages, ships are left nowhere to go and to remain anchored in the North Pacific Ocean.
Is There Any Relief In Sight?
According to ABC News, shipping experts are expecting to see the ship bottlenecks ease by mid-summer. They are hoping that the issues of worker shortages at the ports will get better as COVID-19 numbers decrease and vaccination is ramped up. The only problem is that as soon as the summer is over the demand for products will increase due to the upcoming holiday season. Hopefully, local water ports in conjunction with the Federal Maritime Commission will have figured out a plan by then how to meet consumer demands. One of the greatest anecdotes of all is that there are still containers of Christmas decorations sitting around at the Port Of Charleston that were delayed due to last year’s shut down. Perhaps there are other Christmas gifts delayed just in time for the upcoming holiday season.
Cost Of Shipping Container Increase In 2021
Consumers might not have noticed this but store owner’s costs for shipping a container from China to the USA have shot up astronomically. Normal cost of shipping a container is $1,500 - $2,900. Moving it inland via intermodal logistics companies costs around $500 depending on how close you are to the water port and how far it needs to get to its final destination. In 2021, the cost of shipping a container from China has skyrocketed beyond any store owner’s imagination. The demand for containers from China has gotten so high that we are now paying almost $5,000 per container and shipping companies are returning them empty to China to fill the demand of product imports. During normal times, once the container was unloaded and completely empty it would be sent to a farm and loaded with grains, feeds, soybeans, and other agricultural products. The container would then be sent back to China and benefit the United States economy. But now container shipping companies are willing to send them back to China empty to make sure that they are in line to serve another customer at the high price of $5,000+ per container.
Demand for products like Peloton Bikes has skyrocketed since such brands are forced to swallow the cost of shipping to fill customer's orders. However, many of these types of products are stuck at the water ports awaiting for the containers to be unloaded. To get around the ship bottlenecks, companies have elected to ship cargo via air. Stocks have begun to soar for publicly traded logistic air companies like Atlas Air Worldwide that have their cargo planes packed to capacity. The only question is if store owners are going to absorb these costs for a short period or pass them along to the consumer?
Container Shortages - COC Containers Vs. SOC Containers
Just when you thought this logistics nightmare was over there is one more element that exacerbates the problem. There is a shortage of shipping containers at the ports due to the many containers that are still in transit. There are two types of containers, Carrier Owned Containers or better known as COC containers, and Shippers Owned Containers or commonly known as SOC. The cost of COC price should go down when there is a surplus of containers being transported while when there is a shortage of containers the price of containers will increase. In the current shipping climate, SOC would benefit as the cost of shipping a container back and forth remains static while the cost of a COC container will increase. In addition, COC containers are being shipped back to China empty to fill the next order. This has led to a shortage of shipping containers that have resulted in increased prices per container. Container companies are getting greedy and will do anything to get those containers ready for the next shipment.
In order to respond to the demand for empty containers, the Marine Department of Hong Kong had announced an easing of regulations that would allow large vessels to call Laem Chabang Port without seeking a permit. This will make it easier for ships to unload their empty containers when coming into water ports via the South China Sea. Each port has its own requirements and this trend will be passed along to other water ports. The hope is to generate an influx of containers while keeping down the cost in an already volatile logistics situation.
Ship Gets Stuck Sideways In The Suez Canal
There are two basic shipping routes from China to the United States. The basic route to the West Coast goes from the South China Sea via the Pacific Ocean. The other route is a bit more complicated and includes going from the South China Sea, to the Indian Ocean, through the Suez Canal, across the Atlantic Ocean where you reach the United States. From there, ships will go to Northeast, Southeast, and Southern United States. On March 24, 2021, a massive cargo ship got stuck sideways in the Suez Canal. The canal is critical in shortening the shipping route from China to the United States. To better get an idea of the size of this cargo ship, try and imagine four and a half football fields. Moving such a big ship is no easy feat and will require professional engineers to dislodge it from the banks of the Suez Canal. Meanwhile, many ships are sitting again in traffic and this is just another burden for the global shipping industry. Hopefully, by the time you read this article, the ship will be removed and ships will be able to continue their journey.
The international shipping community is facing never seen before challenges and local economies need to understand what's going on. When your cargo does arrive in the United States you need to have a reliable container trucking company that can get it to you as fast as possible. This is especially true if the container needs to be delivered to the American Heartland that is not close to water ports. Final destination spots like Kansas City, MO, will require a drayage service that can make the final haul for your container. Hopefully, shipping will normalize and prices will begin to go down and stabilize. Until then companies that are waiting on containers to fill their store shelves need to learn to adapt to these shipping delays. The sea weather is a bit stormy these days and surely soon the stormy waters calm.