I’ve been reading as much as I can about what’s happening to our supply chain, both into and out of the USA. I’ve also been corresponding with friends, and reading messages on an e-mail chain to which I belong about how other people are finding supply issues impacting their day-to-day lives. I thought it was about time to put it all together into a picture of where we are now.
First, let’s look at how the international supply chain to the USA is being impacted by freight and shipping problems.
Somewhere in the world’s busiest port of Shanghai, a container of fertilizer sits among tens of thousands of boxes, waiting for a ride to the U.S. It’s been on the dock for months, trapped by typhoons and Covid outbreaks that have worsened major congestion in the global supply-chain network.
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… in February … a supplier for farmers in Illinois placed an order for eight container boxes filled with fertilizer from factories in central China.
Before the pandemic, a batch like this would typically arrive in Chicago in April … But by May some of the fertilizer was still sitting in Chongqing, 2,400 kilometers west of Shanghai, where it was manufactured. The culprit: a shortage of empty containers for transport. The crucial return of these steel boxes from trips to the U.S. and Europe has been delayed by everything from understaffing to a lack of trucking equipment to move goods out of ports.
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The fertilizer was loaded into the containers, and they were driven to barge vessels on the Yangtze River.
The trip down China’s busiest inland waterway took eight days. This container was lucky as it was shipped ahead of typhoon season. Others recently haven’t been so fortunate.
. . .
While the shipment avoided any flooding disasters, it couldn’t escape high transit costs, as freight rates have skyrocketed on international routes as well as along the Yangtze … The container finally arrived in Shanghai on May 27 and a truck delivered it to the world’s busiest port.
Kranig isn’t sure why the container is still stuck in Shanghai while seven other boxes of the shipment found their way to Chicago, but he suspects the chaos that hit Chinese ports is a major factor. The pandemic has thrown shipping into upheaval over the past year and a half, with China becoming a major choke point.
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For now, the unlucky box of fertilizer remains stranded among the stacks at the port, buried like the crate in the final scene of “Raiders of the Lost Ark.”
Once the fertilizer finally hitches a ride to the U.S., the risks aren’t over. The Pacific can be a treacherous crossing for ship captains racing to meet deadlines. And when the cargo safely arrives on the North American coast, more headaches await.
The biggest U.S. trade gateway with Asia has been clogged with the most inbound container vessels in more than six months … Next comes the inland journey. It could take another one to three months for the container to get from a West Coast port to Chicago by rail or truck.
There’s more at the link.
So, there you have it. Order placed in February, expected to arrive in April – but it’s now well into September, and it still hasn’t arrived. Some may say, “Well, that’s only fertilizer. It’s not important.” Not so fast. The farmers who would have bought it couldn’t get it when they needed it, so they’ll probably produce fewer crops this year. That, in turn, impacts all those businesses supplying farms with what they need – not just fertilizer, but seed, farm implements and machines, cattle feed, things the farmer would buy for his household but now can’t afford, and so on. The dealer who would have sold the fertilizer has had to pay for his shipment, but hasn’t received the goods yet, and will have to pay through the nose for higher freight charges, meaning he’ll have to sell the fertilizer at a much higher price to cover all its costs. If his customers can’t afford those prices, he may go out of business. That single supply chain issue has probably impacted anywhere from a dozen to a score of individuals and small businesses – and it’s only one issue among millions of them. Their cumulative economic impact is staggering.
Wolf Richter calls it “The Peak Shipping Season From Hell“.
There are currently 56 cargo ships anchored in front of the ports of Los Angeles and Long Beach. This includes a record of 44 container ships, bypassing the infamous record of 40 set in February 2021. This is the run-up to the holiday selling season in the US, when retailers are desperately trying to stock up their inventories, which from many categories, including apparel, have already been running low.
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Since production of many consumer goods has been offshored by Corporate America, from Apple to Zappos, to cheap-labor countries, this stuff has to be imported.
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Now is peak shipping season in the run-up to holiday selling season, and ports are congested, rail yards are bogged down with containers, shippers are complaining about a driver shortage in the trucking industry, warehouses are full, everyone is complaining about labor shortages, and containers get stuck and tangled up and rerouted.
Each container that sits on a ship that is at anchor waiting for a berth, or that is stuck in a rail yard or port somewhere, is a container that another shipper with merchandise ready to ship cannot get their hands on. And there has been a mad scramble underway to just get empty containers.
The port congestion in Asia isn’t helping.
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When you talk to people have to get containers shipped to the US or from the US to Asia, you hear a litany of stories about “containers from hell,” that got hung up somewhere, then were rerouted, then got hung up somewhere else, and finally arrived way behind schedule, and after endless hours of trying to sort it all out.
And they’re complaining about sky-high rates … There are complaints that the container carriers … are just doing whatever they want and charging whatever they want, and are getting away with it, to the endless frustration of shippers. And those shippers then have to figure out a way to pass on the extra costs to their customers. And that’s happening too.
Again, more at the link.
The supply chain disruption is hammering US exporters as well. To take just one example, agricultural exports are being seriously affected – a situation made worse by Hurricane Ida a few weeks ago.
… the pandemic-driven disruption to supply chains has had a major knock-on effect for containerized grain and oilseed exporters: lack of containers in the interior, and chassis to move the containers on the road. The extreme volume increase of imports – and resulting congestion – in such a relatively short time has caused ocean carriers to begin restricting container flow to major rail-served interior markets. This has particularly choked container availability in Chicago, from where a significant portion of the US’ containerized agri exports originate.
Taken together, the hopes of farmers, exporters, and buyers were pinned on the ports and terminals of South Louisiana being able to pick up the slack for export capacity as the US enters harvest. Unfortunately, this will not be the case until at least October or even November. Both of Cargill’s terminals in the region impacted by [Hurricane] Ida are offline, with the 6-million bushel capacity facility in Reserve suffering extreme damage that could take months to repair. CHS Inc.’s primary export terminal at Myrtle Grove also suffered damage to the power lines that serve the facility, along with water intrusion to the grain handling equipment. Similarly, Archer Daniels Midland, Zen-Noh, LDC, and Bunge have reported power interruptions and varying degrees of damage at their regional facilities. Lastly, navigation on the lower Mississippi River continues to be slowed by flotsam and power outages.
Now, what does this have to do with China and the immediate future of the Transpacific power struggle?
In short – China is desperately short of crucial grains and oilseeds needed for domestic human and animal consumption … Despite China’s rosy claims about its 2020 production, its year-long buying binge for available global inventory of grains and oilseeds indicates significant flooding-related production woes in several major agricultural reasons in the Yangtze River and Amur River basins. 2021 is shaping up to be potentially as bad … Closely related to the trade indicators for grain production, import, and consumption is the issue of animal feed.
Bringing it full circle to the devastation to US agri export capacity wrought by Hurricane Ida, there is now an imbalance of supply and demand such as we have not seen in a long time.
This is now having greater and greater impact on US vendors and consumers, who can’t get what they need when they need it. Two examples of recent articles:
Shortages of metals, plastics, wood and even liquor bottles are now the norm. The upshot is a world where buyers must wait for delivery of items that were once plentiful, if they can get them at all … Along with the shortages come hefty price increases, which has fueled fears of a wave of sustained inflation … Shortages are hitting everything from bulldozers to bourbon … New challenges continue to arise, including hurricane disruptions to U.S. oil refineries which is again threatening supplies of plastics and other basic materials.
Companies are preparing for historic supply chain snags to continue into 2022. The president of UPS, Scott Price, said on Sunday … “The logistics industry does not see 2022 as having any less disruption in supply chains than in 2021,” … several companies have already boosted consumer prices due to elevated shipping costs … Food prices in the US have been on the rise for six straight months. In June, US consumer prices hit their largest annual increase since 2008, with oil and food prices leading the categories with the largest price hikes.
I’ve had some recent personal experiences with supply chain problems and what they’re doing. Two examples:
- I took a vehicle into the service station yesterday to check out a diagnostic code. While he was doing that, the mechanic told me they’re solidly booked all week long with engine and transmission rebuilds on farm and work pickup trucks. Apparently farmers, ranchers and small businesses can’t find new or lightly used vehicles to replace older, worn-out ones, thanks to supply chain difficulties; so they’re opting for rebuilds costing $8K-$12K instead. Unfortunately, that’s creating increased demand for spare parts for the rebuilds – so now the parts are becoming hard to find, and replacements for them aren’t in the pipeline until the factories can produce them, which won’t happen until they can get their input materials from their suppliers. He reckons the rebuild business could be a huge moneymaker right now, if only parts were available. He also said that junkyards were asking fantastically high prices for good-condition parts from wrecked vehicles, and getting them, too, because they can’t be found anywhere else.
- I refilled my regular prescriptions last week. While waiting, the pharmacist and I got to talking. She says they can’t be sure that their daily resupply will come in as ordered, or even at all on some days. For the first time in a long time, they can’t promise to fill or refill prescriptions on demand. Some patients are having to wait up to two to three weeks. Two of my own prescriptions had to be filled with pills from two or three different manufacturers, which meant the pharmacist had to warn me that even though the pills looked different, they were, in fact, the same medication. She warned that things are getting worse, so when I next come in, three months from now, I may find I have to wait “weeks” for refills of everything. She apologized, but said there was nothing they could do. They’re seriously worried that some patients may suffer life-threatening consequences if they’re stuck without critical medication for too long.
Finally, some examples from e-mails I’ve received in recent weeks about how friends and acquaintances are experiencing supply chain problems.
- “I’m at the Technology and Maintenance Council Show … How about the largest battery testing company in the USA out of testers and it could be March before they see any more? TPMS sensors for tires, running out. One brake drum company said they will have drums next April IF all goes well. Vendor after Vendor is talking about their woes. My woes still remain too. I’ve got backordered sales of 2,000 units for one significant part number. I’ve been out since June. I’ve got 1,000 of them in the LA harbor and it will be at least 60 days for the three containers to get to my location 20 miles away. It used to be a week to get delivery.”
- “She ordered some new furniture from Lazy Boy and was told at the time that delivery would take about 6 weeks. The latest story is sometime in 2022.”
- “Every car dealer in McKinney, Texas (there are a lot of them) is at best 25%-35% of capacity of their lots. Normally they are jam packed with cars. There are ‘We Buy Cars’ signs on many dealers. I am getting regular solicitations from my dealer to buy our cars. I had my Ranger in for service at the local Ford dealer on Thursday. Their lot looks like a ghost town. Used car prices are through the roof.”
- “In early April we ordered an 8′ patio table and 8 chairs … It’s made of some sort of poly/plastic stuff and is made in Ohio … Estimated delivery was mid-July. Then early September. I called last week and the new estimated delivery date is “It gets here when it gets here” … I suspect we’ll get to enjoy our new patio furniture when the snow flies.”
- “I needed a replacement part for my [name-brand Japanese] pickup. Can’t be had for love or money, and until it gets here, truck is parked. I’m renting a [US-made] pickup long-term to cover for it, but it’s costing me a lot. Rental truck had a problem last week; agency told me to take it to a local dealer at their cost, because they didn’t have enough stock to give me another one. Local dealer tried for three days, finally got the the part it needed (had to ship it overnight from Michigan). Factory can’t make more without computer chips. Now that it’s in my truck, he doesn’t know when or if he’ll be able to get more. Everyone else who comes in with a similar problem is probably SOL for weeks or months.”
There are many more such e-mails I could quote, but that’s more than enough to get the general idea.
I strongly suggest that you buy essentials now, while they’re still available. This includes commonly needed auto parts (e.g. oil and air filters, spark plugs, brake pads, etc.), consumables for household appliances that may need them (e.g. air conditioning filters, etc.) and so on. That applies particularly to parts made outside the USA, or made in the USA but with components and materials sourced from outside this country. Try to stock up with as many as you think you’ll need for the next year or so. The odds are pretty good you won’t be able to buy them when you need them, or may have to wait an unacceptably long time to get them.
That applies to common consumer items, too. Do you have a preferred brand or size in, say, feminine hygiene products? I’ve already seen a drastic shortage of some brands and/or types – so much so that I’ve laid in a supply of my wife’s preferred brand, sufficient to last her several months. She would not be happy to have to use something she doesn’t like! The same goes for preferred brands of deodorant, shampoo, etc. If you have strong preferences, make sure you get what you want, when and where you can, enough for at least six months, if not a year. It’s worth thinking about things like that before the shortages get worse.
(Yes, some will argue that by buying more than we need right now, we’re helping to make the shortages worse. I don’t see it that way. The shortages are inevitable. We’re just being proactive in dealing with them by anticipating them.)
(EDITED TO ADD: I’ve put up a second, follow-up article about this, incorporating reader comments and other sources.)