Long-term ocean freight rates now up over 90% year-on-year
Oct 5, 2021
As I write this, there are 147 container ships anchored outside of the Port of Los Angeles waiting to dock and unload. It seems that the freight yard is full beyond capacity due to labour shortages throughout the global supply chain, especially for truck drivers who are needed to move the freight out and deliver it in the U.S.
I just learned that the Progressive Detroit Boat Show has postponed another year citing, “…inventory shortages, COVID concerns, and a commitment to customer satisfaction.” Show goers would not be pleased to find skimpy displays with just a few boats, so perhaps it’s best to not hold a weak show, hoping for better conditions next year. Of course, dealers can’t sell boats they can’t get anyway.
But, that was Detroit. Things are different in Florida it seems.
In her most recent member newsletter, Sara Anghel, President of NMMA Canada wrote about her experience attending IBEX in Tampa last week. The show was full of exhibitors and visitors and you couldn’t really tell COVID had swept through the world beyond seeing the odd face mask in the crowds, she said. The now ridiculously politicized issues of masks and vaccinations are a big concern.
That was what worried me and at the last minute, watching the rapidly rising case counts and with the recent nasty experience of getting a false positive PCR test during a trip to Wisconsin, I cancelled my own IBEX trip.
Next up is the Ft. Lauderdale Boat Show in October. Will I brave that and attend? We are still debating it.
For the freight handlers, truck drivers and warehouse people who have long had to work very hard for relatively modest pay, the pandemic and COVID government support has cut deep into the labour force. People seem to have found other ways to pay the rent and labour shortages are not resolving quickly.
That long-term situation prompted a news release from Oslo, Norway-based Xeneta, is a leading ocean and air freight rate benchmarking and market intelligence platform. They just released Xenta’s Long-Term XSI® Public Indices that revealed yet another monthly hike in long-term ocean freight rates, with global container prices climbing by 3.2%. The development follows a 2.2% increase in August and an unprecedented 28.1% jump in July, leaving rates now standing 91.5% up year-on-year. What’s more, there is little evidence to suggest a weakening of market fundamentals – meaning there could be more pain in store for shippers, although with colossal profits looming for carriers.
The fall is a boom time for shoppers for back-to-school, winter clothing, household products and of course, the key Thanksgiving / Christmas shopping season. The Xenta release said, “It’s a crazy market out there.”
Will supply chain constraints continue to limit our access to products? ‘Sure looks like it. We seem to have hit a barrier-level in the global battle with COVID where some people oppose measures to stop the spread, thereby increasing the danger to other people. I want to get back to normal as much as anyone, but simply refusing to acknowledge, or defend against the spread of COVID, is keeping many people at home and out of the workforce.
Freight rates rising more than 90% year-over-year are just one cost that will contribute to price inflation and in turn, inflation may impact the stock markets, government debt levels, future taxation and more. The term “supply chain” is very apt – we are all linked and it keeps me up at night thinking that we are not all pulling in the same direction.
Andy Adams – Editor
