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"Shipping Crisis Turns Into A Nightmare As
Disruptions Aggravate Container Shortage"
by Epic Economist
"The supply chain crisis is entering a very critical phase right now. U.S. ports are already facing record levels of congestion, but labor issues at railroads are threatening to aggravate the situation and create a nationwide logjam of containers, resulting in extensive shipping delays, exacerbating shortages, and putting U.S. businesses on edge as they confront a growing number of disruptions, soaring inflation, expensive freight prices, and a slowing economy. Industry executives are bracing for "unprecedented chaos" during this shipping season given that 40 billion dollars worth of goods are currently stuck offshore and the backlog of containerships outside both coasts is already nearing all-time highs.
U.S. ports have been overwhelmed by an uninterrupted flow of imports for over two years now. Every time conditions finally improve, new disruptions emerge and the system is thrown into disarray again. This time, a labor impasse is threatening to stop U.S. railroads and halt the delivery of essential goods that are supposed to power up industries all across the country. A new report released by FreightWaves exposed that a massive number of rail workers have quit their jobs and over a hundred thousand of them may start a strike as soon as next week.
Union Pacific is scrambling to find railroad crews after years of slashing headcounts. In the first quarter of this year, the $22 billion railroader had 12,000 fewer workers than it had just a couple of years ago. This labor crunch isn’t unique to Union Pacific. Railways all across America are in an extremely chaotic state as companies struggle to find employees. That’s creating worse port congestion than what was seen in 2021 when the rail sector recorded the biggest traffic in history. And now a strike of 115,000 rail workers could create “unprecedented chaos” this peak shipping season given that a growing backlog of containers is already causing major delays.
For that reason, the ongoing rail congestion is leaving many industry executives and lawmakers furious. The coal industry is blaming rail for the “meltdown” in service capacity and grain shippers revealed they had to spend $100 million more in shipping costs to get their product moved amid poor rail service. Meanwhile, authorities in the Port of Los Angeles are saying that railroaders could cause a “nationwide logjam” due to the massive number of unmoved containers sitting around. While the impasse persists, conditions at U.S. ports are deteriorating fairly rapidly. The pile-up of empty containers waiting on Southern California terminal yards is rapidly reapproaching its peak. At this moment, tens of billions of dollars in trade are either landlocked or anchored at sea as congestion continues to build at the ports. MarineTraffic data also shows that the estimated value of cargo waiting offshore exceeds $40 billion.
With shipping cost pressures and other threats looming, recovery is not expected in the near future, and millions of U.S. businesses are on edge with this situation. A new survey of more than 100 U.S. supply chain executives from Carl Marks advisors found that 75% companies faced significant revenue losses over the past year due to supply chain disruptions. Ocean shipping was by far the leading broken transportation and logistics link, at 68%. Moreover, 36% of business leaders said they are “very concerned” about a dramatic economic slowdown over the next 12 months as a result of rising interest rates, high inflation, and geopolitical uncertainty, and a resultant pull-back in consumer confidence.
A lot of people thought that these bottlenecks would be proven temporary, but since the system first collapsed in 2020, the situation has only gone from worse to catastrophic. Unfortunately, a “return to normal” is simply not in the cards anymore, and as problems pile on top of each other, the supply chain chaos will only grow bigger with each passing day."
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