Cargo is piling up everywhere, making inflation worse

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Shipping containers stacked high in the Port of Los Angeles, Calif., April 19. Supply chain disruptions hit small business owners across the United States

Frédéric J. Brown / AFP via Getty Images

John Nephew thought he had a winner with a new table game called Dice Miner. Importing games from China turned out to be its own roll of the dice.

Neveu, founder of Atlas Games in Duluth, Minn., Ordered a 40-foot freight container full of games from Shanghai in December, expecting delivery in about six weeks.

Instead, the games took nearly six months to arrive – an increasingly common example of supply chain bottlenecks pushing inflation at its highest level in over a dozen years.

“We had booked something like eight different sea trips in a row, and we canceled them on our orders,” said Nephew.

Growing Americans’ demand for everything from iPads to cars is driving an increase in freight crossing the Pacific, hitting business owners like Nephew.

When the cargo with its games finally arrived on the West Coast, the container was immediately emptied so that it could be sent back to China for another load.

The games then continued to Minnesota by truck rather than train, which would have been more economical. The final shipping cost was around $ 12,000, at least 50% more than what the game creator budgeted for.

Businesses across the country are struggling with similar challenges getting their goods.

The Port of Los Angeles has just registered its busiest month in history, handling more than a million shipping containers in May, more than half loaded with imports from Asia.

“We feel the pain of the importer and the exporter,” says Gene Seroka, executive director of the country’s busiest freight port. “The impacts that all of this has had are visibly damaging to these men and women trying to do their jobs in the supply chain.”

Seroka adds, “It continues to show the strength of the American consumer during this pandemic-induced shopping spike.”

The record volume of goods overwhelmed longshoremen, truck drivers, warehouses and railroads. Ships wait up to five days just to enter port, and it can take another 10 days for a container to be loaded onto a train.

Five container ships are visible in a large body of water with land in the distance.

Container ships and tankers are anchored near the ports of Los Angeles and Long Beach on February 1 in San Pedro, California. The Port of Los Angeles recorded its busiest month in its history in May.

Mario Tama / Getty Images

Things are not as busy on the east coast. But the cost of transporting a refrigerated container from Italy to New Jersey has climbed to $ 10,000, more than double the rate before the pandemic.

“They say there are not enough containers in Europe, lack of space on the boats,” says Philip Marfuggi, CEO of Ambriola Co. and board member of the Cheese Importers Association of America .

Not only is it taking up to twice as long for shipments to arrive, he says, but deliveries have become less predictable.

“Like the other day, I brought in eight containers,” says Marfuggi. “They should have been about two a week. And then all of a sudden they all came at the same time.”

All of this unpredictability creates costs and headaches for businesses that have become accustomed to reliable, just-in-time delivery.

Federal Reserve Chairman Jerome Powell said these “choke effects” were greater than he and his colleagues had expected, prompting the central bank to raise its inflation forecast this year to 3.4%. But Powell has expressed confidence that the freight constraints will not last indefinitely.

“Prices like that, which have been going up very quickly, due to shortages and bottlenecks etc. – they should stop going up and at some point they should even go down,” Powell said. to reporters last week.

The Biden administration has created a task force to address the most pressing shortages, such as computer chips, while looking for ways to build more resilient delivery networks for the future.

“One of the things the pandemic has exposed is just how vulnerable we have in our supply chain,” said Brian Deese, director of the president’s National Economic Council.

Joe Biden has an electronic chip.

President Biden holds a microchip as he speaks before signing an executive order securing critical supply chains at the White House in Washington, DC on February 24. A chip shortage after increased demand has hampered key industries such as automakers.

Saul Loeb / AFP via Getty Images

As fears of a pandemic subside and people are able to spend more money on travel and entertainment, the demand for goods is expected to decline.

But it could take months to resolve the traffic jams. With back to school and holiday shopping still to come, the Port of Los Angeles is expected to remain extremely busy throughout the fall. Seroka believes it will be early next year before freight volumes return to more normal levels.

This is bad news for business owners like Nephew, who are already bracing for even higher shipping costs after already having to pay 50% more to ship their Dice Miner games.

“It’s just a mess,” says Neveu. “This shipping price is going to look like a bargain in the next few weeks.”

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