Disruptions Are Here To Stay
Surging Demand Meets Collapsed Trade Infrastructure
The pandemic shut the entire world down, effectively collapsing global trade infrastructure that was developed over decades.
Additionally, the world's demand for goods and services plummeted when a world-wide lockdown was instituted.
It worsened when the lockdown extended; causing unemployment to spike dramatically.
However, thanks to a massive stimulus plan in the US, customer demand surged. But, after being exacerbated & inflamed by the extended period of high anxiety, stress, and depression, demand surged beyond expectations.
Fanning the Flames with Demand
After the stimulus checks hit, there was a massive whiplash of demand in nearly every industry that flooded retailers with orders.
Ordinarily this would be a boon for the economy and global trade, but by that point the damage to the global trade infrastructure was too deep and hadn't yet been repaired.
So, when this new demand hit and couldn't be kept up with, it ultimately became a killing blow.
Like the first domino falling in a row, the supply chain finally broke.
Container Supply & Demand Imbalance
Shipping containers are the back-bone to global trade. We see them on trucks, trains, and ships moving goods from one international hub to another.
So when the world needed medical supplies, containers were co-opted to fulfill the needs throughout the globe.
Many containers were sent to carry millions of masks to countries in Africa and South America. Followed by a surge in demand.
Since demand spiked so dramatically, companies concentrated their efforts on the most profitable routes; Asia to North America & Europe. Which meant leaving the containers in Africa & South America empty & uncollected.
With the containers parked out of use, there are fewer containers available for trade, which is creating an imbalance in supply and demand.
Today, the average price of a Chinese made 40" container is above $6000, more than double the price in 2016, and recently hit above $10,00 per container for the first time in history.
More Ships Are Needed, But They're Years Away
One of the solutions to the need for more ships, has been creating larger and larger ones. But large ships take more time and resources to construct, so the first ships won't be available until 2023 at the earliest.
Larger Ships, Longer Offloading
Large ships mean longer offloading time, and more large ships means more & more delays offloading at ports.
The Port of Los Angeles recently implemented changes to deal with the increased traffic, which resulted in a 50% increase in productivity at pre-covid levels. But vessels are still sitting at anchor 2.5 times longer the pre-covid, with a record number of ships waiting to enter ports.
There are plans to operate the Port of Los Angeles on a 24/7 cycle, but establishing a nonstop schedule has proven difficult. A shortage of truck drivers and nighttime warehouse workers, along with difficulty getting importers to embrace expanded hours has delayed those plans, maybe indefinitely.
Size Limited by Size
Additional development of larger equipment is required to enable the ports to offload shipping vessels faster, but they're limited by constraints that ships are not.
For example, our roads and railways are only so wide and can only fit trucks or trains so big before it becomes functionally unusable.
Unlike shipping vessels, that can be the size of a floating city without worry of a fitting down a roadway.
However, that doesn't mean ships are not unlimited in size; at least for now.
Canals & straits also require expansion for this new class megaships, but comes at great cost. Expanding the Panama Canal alone would need an estimated $5+ billion.
There is an economic argument that could be made in favor of these types of expansions however. Both in the immediate job expansion they would create, and the future trade it would facilitate.
However, even if those projects began today, they would still be decades away from becoming a reality.
Trucking Industry Ravaged by Unemployment
The disruptions don't stop there.
Employees are opting to return home, frustrated by employment conditions, having kids at home, and/or safety concerns.
And although wages are rising, employers are having a hard time luring back people in the industry who have moved on to jobs that can offer them a better lifestyle.
Additionally, rising labor cost to independent contractors is making the trucking industry unattractive to owners. Leaving it up to large companies alone to fill the demand for drivers and trucks.
Murphy's Law in Full Effect
On top of everything else that was causing disruptions, as if the world was getting an example of Murphy's Law, shipping costs skyrocketed further when the Suez Canal was blocked for days by the Evergreen container ship.
Because it is such a major trade route, coupled by the duration it took to unblock it, the disruption caused a chaotic scramble still being felt today.
A total of roughly $54 billion.
Unfortunately, that figure is based on solely the cargo shipments that were halted or delayed due to the blockage.
The actual economic damage could be much higher as the effects are still being felt around the world and prices are likely to continue soaring.
Navigating Through the Disruptions
Having a reliable, local supplier for your products is more important than ever with today's disruptions.
You can avoid all the rising costs and increased shipping times by working with the right retailers that buy & stock in bulk.
And although we aren't impervious to supply line disruptions, our inventory is still stocked and ready to deliver wholesale prices and fast turnaround times.
Even pre-pandemic, we stocked our warehouse with bulk orders of cabinets, flooring, and countertops to ensure the fastest turnaround times and wholesale prices.
Get a Quote today or Call to learn how we can help you avoid long delivery waits and save money!
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