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"Brace For Explosive Prices & Extensive Shortages
As Supply Chain Crisis Gets Much Worse"
by Epic Economist
"The effects on ocean freight capacity are starting to get worse almost a month after the Ever Given ran aground in the Suez Canal. When the Suez was blocked, ships arrived late to critical ports of call. Transporters had to respond by canceling sailings that were scheduled on these late ships. Earlier this month that many of these sailings will likely be delayed for longer than forecasted, and the altered schedules have been forcing transporters to unload cargo at incorrect ports as they attempt to rapidly turn ships around and get shipping containers back to Asia, according to The Loadstar.
"Port congestion and delays at both origins and destinations are expected to make the container shortage in Asia worse over the next few weeks," Freightos said in a market update. Container ships' logjam at US ports isn't helping to ease that situation. Even though the number of container ships stuck at anchor off Los Angeles and Long Beach is down to around 20 per day, from 30 a few months ago, it doesn't mean the capacity crunch in the trans-Pacific market is improving. Nerijus Poskus, vice president of Global Ocean at freight forwarder Flexport, warned the supply chain problem is "not getting better. It’s only getting worse,” he told American Shipper in an interview on Monday. “What I’m seeing is unprecedented. We are seeing a tsunami of freight,” he reported.
Poskus highlights that there's probably a growing export backlog piling up each day in Asia, awaiting available shipping containers. If that backlog grows too much, he said, "I honestly don’t know what’s going to happen." As a consequence of the backlog and restocking demand, he believes "prices will remain high and shipping will probably remain difficult for the rest of this year”. The global trader said the situation today is the worst he has ever witnessed - and he thinks it’s about to get even more severe.
“Buckle up. The month of May will be the worst people have ever seen,” he maintained. As several shippers will have to wait in line behind the ever-growing backlog in Asia, he predicts “what’s going to happen soon is that some importers won’t even be able to get on the boat. For them, it will almost feel like trade is coming to a halt.” He also noted that the Even Given accident resulted in a disastrous shortage of container equipment from the global market, and it will take another four to six weeks to come back to normal.
In case you're wondering how this freight crisis might affect you, it's essential to consider that all companies that need to ship or receive shipments of products have to rent what is known as an intermodal container for that purpose. And knowing that's not an easy task at the moment, logistic disruptions will further delay the delivery of a wide range of products to grocery shelves and several US industries.
So as the container shipping shortage aggravates, the cost of rent and shipment keeps skyrocketing. Before 2020, transporting a standard 40-foot container on a ship sailing from a Chinese port cost about $1,000. Today, considering prices are being negotiated on the spot, companies are being forced to pay roughly $10,000 per container. And, of course, the problems brought on by this crisis are not limited to ports, since the delays also impact other parts of the economy.
Products will continue to face major difficulties getting to their destinations around the world because this crisis on the high seas has completely distressed global commerce. And a wide range of things, including cars, clothing, food, furniture, electronics, and raw materials, usually shipped in those containers, are likely to face shortages even more acute than previously predicted, leaving global traders panicked as high consumer demand is still adding pressure on the issue.
Higher shipping costs will directly affect consumer prices, and analysts have been warning that the supply chain disruption could last a year or longer even if Americans rush in to manufacture missing or delayed products right here at home.
Shortages, higher costs for imports, and a lower variety of products is what is coming next for US consumers. So brace yourselves for a general rise in inflationary pressures over the course of 2021, as global supply chains continue to struggle and the impacts of supply and demand imbalances and the shipping container crunch are forcing prices up - and such significant increases will finally make it to your wallets."
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