Are you feeling it, yet? - Freight Industry Fiasco

International freight costs are currently 7+ times what I’ve seen in my 11 years of importing The Wine Check, not to mention the months long delays. Background: Because all the raw materials come from Asia, the only way we could enter the market as a product that competes with shipping, versus expensive novelty wine luggage, was to manufacture overseas. Our goal was to increase wine sales for the wineries by making wine transport more affordable and put the wine world on wheels for tourists and all wine lovers. We hand selected our factory in Indonesia for its fair business practices as well as EOCA, BlueSign, ISO 901/14001/45001 certifications.

I’m curious if anyone in the industry has felt this with glass, wine barrels etc. If not, it’s just a matter of time. You can research the vast-problem on your own, but many experts and analysts are saying the only thing that will correct it is inflation.

I don’t profess to have all the answers but I wrote our congressman as well as the Small Business Association proposing my thoughts on a stop-gap solution which involved using government ports and resources. If you’re interested, I’ll share the details under separate cover via private message.

This is also affecting my herbal company as those vendors, too, are struggling with massive cost increases and delays. It will effect everyone, save the Home Depots of the world who’ve bought their own freight ships. More towards killing small business and feeding the machine.

The Home Depots of the world aren’t immune. There are shortages of lots of things. (I haven’t been able to find large latex dish gloves for a couple of months!) (FYI, Home Depot didn’t buy any ships. It chartered one ship, which I suspect can transport only a fraction of everything HD buys from Asia.)

I don’t see how the government can help. It’s a matter of ship capacity at the end of the day.

We have government ships, we have government ports. I think we could put them to use. Or we can just wait for inflation which at this point seems inevitable. And as I read, Home Depot does have its own ship. Home Depot now has its own ship. That’s an ominous sign - FreightWaves however supply is certainly still an issue, too.

How many cargo ships do you think the government has?

At best it’s a drop in the bucket. A small drop.

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So we’re to conclude that the cheapest United States labor is still “7+ times” more expensive than Uighur slave labor?

It must royally suck to be an Uighur slave.

[Coming soon to a locality near you, if our “Elites” have any say in the matter.]

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You’re paying 7x for shipping. Isn’t that the definition of inflation? What will paying 20x fix?

Inflation at work.

My good friend whose business imports perishables from Asia paid, pre-pandemic, under $3k per container to ship his goods. Today he pays $25K+ per container.

He’s a b-2-b.

It’s eaten beyond his margin and he has no recourse but to pass it on with increased pricing.

My father depends on goods from Asia. Its a few issues - you had the issue in the Suez and you had a major port in China close for a few weeks because of COVID. Furthermore docks around the world - like any other business - are having trouble hiring people (especially here in the US). From reports my dad gets - the biggest issue in his supply chain are the US Docks out in CA - containers are just sitting at the port. The ports do not have the labor or area to open/process the shipments fast enough. Companies willing to pay more money can get premium access to their containers to be opened sooner. The docks see it as a 1 time phenomena until they are caught up and have no interest in finding ways to increase their output potential. And once the cargo is opened and processed, there is a shortage of truckers here in the United States, gas prices are high for them, etc.

Question is - if things settle back down, will companies bring their prices back down? Doubtful.

This is precisely the situation we are in importing sake from Japan, and our margins were slim to start.

Glass bottles completely sold out in most molds. Many wines I can not bottle for my fall release right now. Most of the stock won’t be in until maybe Dec, so hopefully in time for BerserkerDay, but who knows?

I think many of the supply chain prices will eventually come down as demand comes down. I don’t think we’ll see another $3 trillion infusion of cash into US purchasing power in 1 year. It’s going to take time for that amount of money to work it’s way through the global economy though.

Isn’t this simply the “Invisible Hand” working it’s glove-like magic?

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How many 1,000-foot-long container ships does the US government own? I’d guess none.

The large container ports are owned by government entities (e.g., port authorities), and those are the ones that are backed up. The US Navy’s ports are tiny by comparison.

Invisible hand giving finger.jpg

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I manufacture with steel for my job. Steel has more than tripled since August 2020. Inflation is already here and is only going to get worse. High gas prices have raised the cost of bringing goods to market and also increased the cost of those goods that we all pay for. Wood cost increases added onto all this with most everything shipping on wooden pallets means again we pay more.

I have been shipping product overseas via air freight and bypassing sea freight when possible.

http://steelbenchmarker.com/history.pdf

The question is how much of that is due to temporary disruptions. And it’s just not clear.

I assume the spike in US-produced steel shown on the charts you linked to reflects mill slowdowns because of Covid and shipping delays for foreign steel, both reducing supply.

Lumber prices did go wild over the past year for similar reasons (production declines because of Covid, increased demand as building spiked), but they have been falling steeply in recent months, according to Fed figures (see the chart below). That shows how the market can correct after a disruption.

Gas prices are up the last couple of weeks because refineries on the Gulf are shut down because of Ida damage and power outages. That’s always a volatile commodity, affected by supply outages. Those prices will come back down.

The point is that spikes aren’t that unusual. The question is whether the prices return to baseline levels. We’ll see.

Steel is at an all time high and continues to go up in price. This goes well beyond unusual. We saw price spikes in 2008 and again in 2018 due to Section 232 tariffs. When the mines shut down last year, and the mills went offline and stopped producing, they couldn’t just ramp up enough to catch up to demand. US steel mills can not product enough capacity to cover the demand domestically. We are reliant on imported steel and from what I’m told most countries are protecting their steel from export to take care of home first.

Just got a 21% wood price increase late last month too. Wood is still struggling with high costs.

You’re right – steel prices haven’t turned back down (see the chart below). But all of the factors you cited – except tariffs – are temporary. That was my point. Domestic mines and mills will reopen and when the shipping backlog clears, foreign imports will rebound. The question is when. When they do, the market will rebalance and prices will likely fall, as they have for lumber.

I don’t know whether any countries restrict steel exports. To the contrary, many countries restrict imports to protect their own steel industries. Which means that steel customers pay more.
Steel price chart.JPG

even if one, that’s between 10,000 TEU to 21,000 TEUs or likely ~20,000 containers. That’s a lot of small businesses that could be helped, in my opinion.

Our container which was supposed to sail July 26, “MIGHT” have a sail date at the end of this month and just heard this morning there’s ANOTHER $3000 congestion fee. This 40’ HQ container which we was previously around $4,000 to move will be over $27,000, as of today, barring any further surcharges or GRIs.