[Compiled/Observer Network Lu Dong Editor/Zhou Yuanfang]
The Biden administration's large-scale "money-spending" plan has brought strong consumer demand while also overwhelming major ports in the United States.
htmlOn August 1, the Financial Times pointed out that due to the surge in imports, the United States' railway stations, ports and warehouses have been squeezed out of stock by goods. With too few manpower and unable to transport quickly, "freight congestion is hitting the United States hard", and businesses and consumers are facing wider inflationary pressures."In the railway industry, large-scale vacations have left freight companies without enough employees to cope with the surge in demand. Freight rates have also risen accordingly, up 15% from a year ago." Transportation industry analyst Tranowski said, "It will not be a market for shippers anyway."
data shows that at least 7 of the 10 busiest ports in the United States often face congestion. Among them, demand is one of the influencing factors, and on the other hand, it is because "the efficiency of American ports and dock workers is too low." In ports such as Yangshan, , Qingdao, and Yantian in China, it takes an average of 24 seconds to move a container, while in Los Angeles it takes 48 seconds, which is twice the efficiency difference.
As freight costs rise, American consumers have already felt the impact. From facial tissues to salad dressing , companies that make a variety of products have been raising prices to help fill the price spread of rising freight rates, "In this environment, consumers are facing wider inflation in addition to packaging consumer goods."
"Financial Times" report screenshot
"All ports are affected by congestion"
Wayne Kaylor knew that his container was parked at a railway station in Chicago , but he didn't know where it was. No one could tell him for a full 78 days.
Keller is the head of a dealer in Elkhart, Indiana, which sells refrigerators, stoves and other appliances to well-known RV manufacturers such as Winnebago Industries.
From May 4 to July 21, Keller's containers with dozens of electric fireplaces were lost in the chaos.
"This is crazy," Keller complained, with the company losing sales. "Even if everything comes with an GPS device, they lost it at the railroad yard."
Earlier this year, there were delays in ports in Long Beach, California, Los Angeles and Oakland.
This month, United Pacific Railway and BNSF Railway made it clear that the problem has spread to the inland US. Among them, United Pacific Railway has stopped freight transportation and BNSF has also begun to clear the goods because a large number of containers, like Keller's, can no longer enter the circulation link.
Freight is difficult, manufacturers are charging extra fees and lamenting business losses.
Industrial conglomerate Honeywell blames supply chain difficulties for its revenue drops to up to $200 million. Retailers are busy purchasing enough goods for the holiday season, with large chains ordering more inventory than usual, hoping at least a portion will arrive on time.
"Global supply chains cannot cope with this situation," said Brian Bourke, chief growth officer of North American freight giant Seko Logistics. "There can only be one peak in seasonal demand every year. When all links have to cope with 12 consecutive 'peak seasons', everything starts to collapse."
logistics company CH Robinson said that too many orders have exacerbated transportation disruptions. The company said goods from China will be delayed by 15 to 20 days after arriving at U.S. ports, and up to a quarter of intermodal containers are unavailable because some are used as temporary storage.
In fact, ports on both sides of the US coast are in a state of tension.
In May this year, Long Beach, California had container throughput of more than 907,000, the highest level since 1995. Nine of the port's busiest 10 months in the past 25 years have been concentrated in the past 1 year. Nationwide, the Port of Savannah, Georgia, transported 5.3 million containers in the 12 months ended June 30, a record high of 20% over the previous fiscal year."I think all ports in this country are affected by congestion," said Todd Tranausky, a transportation industry analyst at FTR, a U.S. freight research firm. "In the railway industry, large-scale vacations have left freight companies not having enough employees to cope with the surge in demand. Freight rates also rose accordingly, up 15% from a year ago. Although he expects growth to slow in the second half of this year and 2022, "it won't be a shipper market anyway."
California Port Long Beach, USA
" Consumers are facing wider inflation "
American consumers have already felt the impact.
The Financial Times pointed out that as freight costs rise, companies that produce a variety of products have been raising prices to help fill the spread of rising freight rates. Data from the Bureau of Labor Statistics (Bureau of Labor Statistics) showed that after a 5% increase in May, the U.S. Consumer Price Index (CPI) rose 5.4% year-on-year in June, hitting a 13-year high. Procter Gamble, a maker of
Tide laundry detergent and Gillette razor , plans to raise prices for some products after the company warned that rising commodity and freight costs would cause $1.9 billion in after-tax losses in the coming year.
Colgate-Palmolive will also sell for higher prices, with the company CEO Noel Wallace saying last Friday: "Whether it is trucking and warehousing in the United States, or shipping from Asia to the rest of the world, the logistics network is charged an additional fee."
General Mills, known for Cheerios cereal and Haagen-Dazs ice cream , said that the company is increasing prices in most of its grocery categories and global markets due to rising shipping costs.
Conagra, which makes Chef Boyardee pasta and Orville Redenbacher popcorn, toy maker Hasbro and motorcycle maker Harley-Davidson, also took price increases, which added a 2% surcharge to cover shipping costs.
Kleenex parent company Kleenex (Kimberly-Clark) said the company "takes decisive action" to raise prices in June and early third quarters to offset inflationary pressures. The company had previously announced that it would raise prices for a range of consumer products such as baby care products and Scott toilet paper. In some cases, the company even raised the price by double digits.
Kimberly-Clark CEO Mike Hsu said the company is facing a "significant increase" in costs due to rising prices of materials such as pulp and rising distribution costs.
"Commodity inflation has soared since our April call and our supply chain is challenged," Mike Hsu told analysts on an earnings call.
The Financial Times pointed out that although strong demand gives businesses room to raise prices, it remains to be seen how long people are willing to pay for it. Other industries have observed a decrease in spending, which could give customers extra money to buy consumer goods in their wallets, Hsu said.
However, “in this environment, consumers are facing wider inflation besides packaging consumer goods”, a trend that “makes it more challenging,” Hsu added.
Connolly, CEO of Connorra, said the “ubiquitous” rise in grocery stores and restaurant prices could mitigate the blow to demand.
For Keller, the cost is actually very simple to calculate. A container can hold 79 electric fireplaces, and shipping costs $4,500 a year ago. Now, if his company can get one, $20,000 is already very good, and each fireplace costs nearly $200 more.
He said: "So you can only raise the price for your customers, and this becomes a kind of trickle-down effect. This is really everyone's problem.”
(Observer Network Note: The trickle-drop effect refers to the theory that the poor, vulnerable or poor areas are not given special preferential treatment in the process of economic development, but rather the groups or regions that have been developed first benefit the poor or regions through consumption, employment, etc., driving their development and prosperity. Or they believe that government fiscal allowances can flow into the hands of small businesses and consumers one after another through large enterprises, thereby better promoting economic growth. Here we describe the supply chain price increase layer by layer, and consumers will eventually pay for it.)
Oakland Port
"North America does not have an all-weather working environment"
"If you want to ask what caused container ship to queue up for berths in Long Beach Port, Los Angeles for 6 consecutive months, the simple answer is the new crown epidemic. "In April this year, the World Freight Intelligence Service Website (Joc.com) issued a document stating that
People's tendency to consume after staying at home has shifted from tourism and entertainment to home decoration, which has overwhelmed the shipping system. A large number of containers cannot be quickly unloaded and transported to distribution centers at the dock, which has dragged down the speed of containers being shipped back to Asia and reduced the capacity of the entire system.
IHS Markit predicts that the U.S. economy will grow 6.2% this year, the fastest growth since 1984. Port congestion is expected to continue for months, so it is not surprising that policymakers consider this issue, especially as the Biden administration introduces a $2.3 trillion infrastructure spending bill, with $17 billion of which is spent on infrastructure investment in inland waterways, coastal ports, land ports of entry and ferries. As Biden said, “Our ports and waterways need repairs and redesigns. ”
Joc article screenshot
Joc article pointed out that over the years, regardless of any shipping policy, the real constraints are still productivity, i.e., port labor.
, CEO of Global Logistics and Transportation Consulting, said that all discussions on infrastructure spending are interesting, and reality does require it, but only if these countries have and are willing to invest the corresponding labor force, otherwise it will be futile.
"For a long time, the deterioration of labor-management relations, especially on , the West Coast of the United States, has led to many core issues in container transportation in the United States today. The huge cost growth, limited capacity for terminal automation, long-standing and avoidable disruptions in contract negotiations, and far lower productivity and working hours at ports in regions such as Asia, are at the heart of the problem. ”
Joc gave an example in the article saying that for most super-large ships larger than 6000 TEU, moving a container in Yangshan, Qingdao and Yantian takes an average of 24 seconds, while in Los Angeles it takes 48 seconds, which is basically twice the time.
Jeremy Nixon, CEO of Ocean Network Express Nixon said that berths in Asia work for ships 24 hours a day, which means a total of 168 hours a week. But at the Port of Long Beach, Los Angeles, the berths work 16 hours a day, that is, only 112 hours a week, the dock gates only work 88 hours a week, while in Asia it operates 24 hours a day.
Nixon said that most factories work 24 hours a day, and ports in Asia are usually work around the clock. Unfortunately, the North American market does not There is an all-weather working environment that creates this bottleneck. Considering the issue of lag, how many are caused or worsened by productivity and working hours? Because of the political factors of the ILO, it is a "touching minefield" when solving the problem of the U.S. market.
Joc article believes that if there is always controversy when discussing issues with the ILO, then no policy approach can last. U.S. Secretary of Transportation Pete Buttigieg Buttigieg once said that there is no simple solution to the problem of port congestion.
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