The Struggles Are Very Real, Can Everyone Just Chillout For Like A Second?
The import/export world is crazy right now. Consumers no longer have the patience to wait for products as Amazon has spoiled them with one-day shipping. Store owners have the same impatient consumers breathing down their necks and canceling orders that don’t arrive the next day. The instant gratification era is upon us. And the movement of products throughout the world is just one big old hot mess.
In an effort to encourage everyone to try and be patient for a millisecond, I would like to share a letter with you written June 3, 2021 from our Jaftex shipping broker. This will open your eyes to the struggles that many businesses are facing right now and will probably face through the end of the year at a minimum unless something changes or things settle down.
Dear Clients,
We’ve been facing port congestion, marine terminal delays, shortage of vessels/containers/chassis and lack of terminal workers since the pandemic, but it’s getting worse these days. US importers need wisdom to understand, overcome and handle this difficult situation.
Inflation has already begun. Some importers already raised their product prices. I understand that you can’t raise your prices alone, but need to check around your competitor’s prices too. The ocean freight prices have almost quadrupled, comparing then and now. We were using very low-cost freight before the pandemic, which was happening by the game of chicken on the ocean. Certainly, it can go down once the economy goes down in 2022. Until then, however, these steamship lines are very reluctant to invest in more vessels or routes to make more container space for your company. Rather, they’re enjoying the current freight surge very much. (I bet!) There has never been a shortage like this before.
The most important thing is to ship on time and receive goods on time for the buyers, but this cannot be guaranteed even with the premium freight these days. Buyers will turn away or send you chargebacks for any late shipments. We are in a really difficult situation, but one thing that I tell everyone is that it’s better to Ship Now, Not Later & Have a safe inventory management as much as possible (easy for him to say especially since we are printing new lines every month!) because scheduling delays will be expected to happen very often in the 2nd half of the year. (You mean it’s going to get worse?)
Today, premium freight shows $15K per 40ft container from Shanghai to NY with a June 05 departure with Ocean alliance vessel, but one shouldn’t expect it will go down next month. This premium freight has been rising since April. The more time passes, the more the price rises. March was better than April. April was better than May. And May is better than this upcoming June.
I don’t know now whether the price can really reach $20K for a 40ft container in the future, but many indicators already show a rise by the simple principle of supply and demand. Carriers still receive a lot of bookings as the traditional peak season starts from June 15 on. Container booking is already full. I hate this surge as much as you do, but the pandemic changed a lot of things around the international maritime industry and supply chains.
Spot rates come from Ocean alliance, which consists of CMA CGM, EVERGREE, OOCL, and COSCO. The 2021 market is expected to be good enough with retail sales, which means container space will run out even more from June to Jan 2022. Please see the articles below. Each article tells about this premium freight or the latest logistics issues.
We’ll continue to talk to FMC (Federal Maritime Commission), SSLs, and port marine terminals about these issues. Governments are intended to promote competition and prevent monopolies by the US antitrust law, but we have to be well prepared until things get better.
As you can see, the rest of the year is not going to be any better. In fact, it looks much worse. With that, I just ask everyone who needs fabric from me or from my customers to please just chillout and have some compassion for all of us who are struggling to do our best during these extremely challenging and unprecedented times. Wish me luck!
I welcome your comments.