The surge in US imports from Asia is causing supply chain challenges for shippers. The challenges come at a time when shippers are desperately trying to replenish their depleted inventories. The surge in imports is expected to last through the end of October. Some logistics experts are predicting the surge could last through the end of the year before the market stabilizes.
The pandemic is keeping a specific demographic of shoppers away from the brick and mortar stores. These consumers are opting to buy their products online which is fueling the import growth. These E-commerce shoppers are finding that you do not need to wait until Black Friday to secure a good deal. As a result, Black Friday will look much different this year due to the pandemic and E-commerce shopping.
Strong US imports, while a positive sign for the US economy, is creating space and container equipment shortages for shippers. Equipment shortages are prevalent in every Asian country, especially China. Shippers are being advised to accept any container size available to move their cargo. The next hurdle after finding equipment is finding available space on a containership. Carriers are adding additional sailings from Asia known as “extra loaders” to keep up with the strong demand. Unfortunately, the extra loaders have had little impact on resolving the present space issues.
Carriers have taken advantage of the heavy demand by increasing freight rates. Shippers that rely on the spot market for rates are paying 114% more in freight costs now than in May. The cost to ship a container from China to the port of Los Angeles in May was $1700. To ship that same container today is $3650. Experts are predicting that cost will increase to over $4000 sometime during the month of September.
Spot rate shippers are not the only shippers being squeezed on rates. Shippers that reply on contracts to move their containers are also being forced pay additional money to secure sufficient space on ships. The relationship between the carrier and contract shipper is at an all-time low. Shippers are being asked to pay more but are receiving no space guarantees in return for their investment.
The next two months will be very challenging for shippers. Increased rates and lack of space are issues that will need to be monitored on a daily basis.
