As congestion continues to get worse at both coasts, U.S. companies are now paying the most expensive prices to move goods around ever recorded. Industry executives are seeing a 1,000% spike in shipping container prices as the backlog of empty containers keeps growing at major U.S. ports. Recent surveys show that pessimism is growing across the board, with an overwhelming majority of business owners reporting supply chain disruptions, shipping delays, and increased volatility in their operations. To make things worse, new data shows that hundreds of containerships are headed to the U.S., meaning that the chaos at ports has only just begun.
Global shipping giant Maersk is predicting this year’s annual profits to reach $31 billion, a $10 billion increase from its January forecast. But many across the industry are accusing shipping companies of ‘profiteering’ and contributing further to the crippling cost of living crisis. Each year, the Danish firm typically moves 12 million containers around the globe. But over the past couple of years, the company has raised prices from around $2,600 per container to between $26,000 and $30,000 today. That massive spike has fueled inflation and widespread consumer price increases that have continued to squeeze the budgets of millions of American households in recent months.
According to Nick Glynn, from the Buy it Direct Group, shipping firms are “acting like a cartel”. In a recent statement, he noted that “the extraordinary costs for a single container are directly hitting businesses and consumers”: “If you go back to 2019, the price of moving a 40ft container was less than $2,500. During Covid this went up over 1,000% percent, reaching $26,000. This has a significant impact on the cost of goods.” But even though shippers say that shipping and freight companies are price gouging, the firms cite worsening port congestion as the main reason for the sharp price hikes.
The situation at ports is getting critical again. Windward data shows that from March-June 2022, container vessels undertook 800 voyages from China to US ports, representing a capacity for 4 million twenty-foot equivalent units. Right now, there are 212 container vessels currently en route to a U.S. port, according to the firm’s analysis.
Congestion is no longer a problem exclusively seen at West Coast ports. “The port congestion situation has morphed from primarily impacting the West Coast to where it has shown up on all coastal ranges,” as noted by Blue Alpha Capital founder John McCown in a new research report. “The present port system is not in a position to accommodate the geometric growth on the foreseeable horizon. Containers can’t be endlessly stacked ever higher in existing terminals,” he added. As of Thursday morning last week, there were 153 container ships waiting for a berth off East and Gulf Coast ports.
This month marks the beginning of the traditional peak season in ocean shipping, which means that the current backlog of containers at the ports will only increase congestion and add wait time for incoming vessels. It also means that shipping prices could go even higher and that businesses haven’t seen the worst of supply chain disruptions just yet.
With all that said, it’s no wonder why an overwhelming majority of 97% of manufacturing companies in the United States reported that they are experiencing “significant disruption” in their direct supply chains. Those who are anxiously hoping for a light at the end of the tunnel and some relief from the current state of shipping and freight prices are probably out of luck. At least, that’s what the industry executives expect. Although the specifics vary slightly in how long they think rising container prices and port congestion will persist, pessimism is still spreading across all sectors.
End consumers will be facing more painful price increases in the months ahead and inflation probably hasn’t peaked yet. The system is gradually falling apart, and Americans will confront the repercussions of the ongoing supply chain collapse sooner than they think.
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