Some companies are buying their own containers
A Bloomberg News article, “Shipping Snarls Force Global Trading to Look Outside the Box,” provides some interesting insights into how some companies find workarounds for the current strains in the international and national supply chains. The article’s author, Enda Curran, puts it:
Exporters, importers and their agents are considering buying their own shipping containers and chartering vessels to avoid the sky-high costs and delays of existing services.
That seems like an extreme approach and out of reach for most companies but not all.
Some buyers are postponing orders due to extremely high freight rates
It seems, according to the article, that some buyers are postponing shipments due to sky-high freight rates. The article quoted Dave Cave, president of Dragon-i Toys, the maker of Sea-Monkeys, as follows:
Exporters in Asia complain that rates to move freight to Europe or the U.S. jumped fivefold in the past year. One large maker of toys such as Sea-Monkeys says buyers are deferring shipments until prices cool down.
How the cost of freight impacts pricing
The question that everyone is pondering is whether prices will go up due to the high freight rates or whether companies will attempt to wait it out until Spring when freight rates are expected to “normalize.” I found this calculation in the Bloomberg article to be of interest: “a 15% increase in shipping costs leads to a 0.10 percentage point increase in core inflation after one year.”
It seems that whether buyers are postponing shipments or putting off price increases, if the freight rate shock continues past Spring, we could see the need for some significant price increases.
Increased demands on U.S. trucking companies
A Wall Street Journal article by Sarah Chaney Cambon, “Blue-Collar Jobs Boom as Covid-19 Boosts Housing, E-Commerce Demand,” quotes Brian Sage, the executive vice president of Great Dane, a tractor-trailer manufacturer, stating that demand for trailers to haul freight is up dramatically. The article states:
“After initial lockdowns last spring, shoppers began ramping up online purchases, and orders for the truck trailers that Great Dane makes shot up rapidly.”
Mr. Sage feels that the demand will not let up any time soon. He states that “many consumers who embraced the conveniences of online ordering will never fully return to their previous in-person shopping habits.”
