Container Shortages and Port Congestion Leads to Increasing Freight Costs
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How did the container shortage come about?
Only 40% of containers shipped from China to North America were returned to China after China’s Covid-19 recovery and during the shutdowns in the Western hemisphere. This means almost half of those containers are unusable. On one hand, container manufacturers are not producing them fast enough to meet the current demands. On the other hand, containers are not unloading fast enough due to the lack of resources and due to the previous port congestions. Port congestions are the results of the previous port closures during the pandemic. Rail companies such as the Union Pacific have instituted shutdowns due to congestion and will further contribute to delays.
What does a shortage in containers mean?
A shortage in containers means a shortage in inventories. Big retailers are driving demands even higher as they try to get stock ready for the pre-holiday season. Container manufacturers are charging premiums for their containers due to this high demand (Source: dedola.com).
We manufacture our fasteners, stampings, and castings overseas, so this is a direct impact to our costs. We are already seeing the increase in freight costs across all international supply chains. These container surcharges will begin to emerge in our prices despite our best efforts to absorb them. No one likes to be the bearer of bad news but these are the results of an unfavorable situation. We are hoping for the market to stabilize but this is unlikely to happen before the major Holidays in 2021.
