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The Acceleration of Transportation Shortages...Part 2

from the publisher

In my last Publisher's Statement, I discussed the port congestion caused by chronic box shortages. I poised the question asking if this could have something to do with creating more demand than supply and in turn increasing the amount charged to the supplier/manufacturer to export their products.

I went on to say that Suez Canal incident exacerbated the transportation shortages. However, this happened to be sheer coincidence that the Suez Canal incident happened during a time when transportation shortages were already being reported as early as November 2020. The Suez Canal incident happened 3 months later. I may have found partial answer in an article last year. From that article, US transport consultant Jon Monroe said this:

"We should remember that carriers began managing (manipulating) the space before contracts were completed in order to keep rates up to a certain level. Once the contracts were completed, carriers kept blank sailings for another seven weeks, thereby creating a backlog of bookings."
Monroe acknowledges that there has been a surge in demand for capacity, but adds, "But what made this so terribly difficult was the early manipulation by the carriers to create a tremendous backlog. So, if the carriers did not create this problem, they certainly were a major contributor to this mess."

We are now into June and the problem is still going on. I have spoken with many of my West Coast exporters and not a whole lot has changed. Container shortages still exist and we may be getting to a point of clarity regarding this issue. Bloomberg had a straightforward analysis of the container crisis and it is something US shippers already knew. It starts out saying "Food is piling up in all the wrong places, thanks to carriers hauling empty shipping containers".

It then goes on to explain that Global competition for the ribbed steel containers means that Thailand can't ship its rice, Canada is stuck with peas and India can't offload its mountain of sugar. Shipping empty boxes back to China has become so profitable that even some American soybean shippers are having to fight for containers to supply hungry Asian buyers.

"People aren't getting their goods where they need them," said Steve Kranig, director of logistics at IM-EX Global Inc., a freight forwarder that handles cargoes including rice, bananas and dumplings from Asia to the U.S. "One of my customers ships 8 to 10 containers of rice every week from Thailand to Los Angeles. But he can only ship 2 to 3 containers a week right now." The core issue is that China, which has recovered faster from Covid-19, has revved up its export economy and is paying huge premiums for containers, making it far more profitable to send them back empty than to refill them.

The article points out that while it is not entirely uncommon for containers to transit back empty after a voyage, carriers usually try to backfill them to profit from shipping rates in both directions. But the cost of carrying goods from China to the U.S. is almost 10 times higher than the opposite journey, prompting liners to favor empty boxes instead of loading them, Freightos data showed.

My conclusion is that the trade war with China has evolved into some unexpected consequences. Make no mistake…the carriers are making money. But the US suppliers of food and agricultural products are once again the victims. In a recent article by The Insider, it was summed up best.

US exports have not kept up with imports from China, our largest trans-Pacific trading partner. According to FreightWaves SONAR data, import volume from China via ocean shipping is up 54% year-over-year. Exports have only ticked up by 4.4%. That means lots of containers are leaving Asia, but not enough have been returning there.

Unbelievable! The trade balance is non-existent. China is still exporting a disproportionate amount of products into the United States as compared to the United States exporting a mere 4% to China. The fact is that the trade war is still going on. China has the advantage in the container shortage, and they are not going to flinch. And why should they? The US suppliers are real losers here. They have product that cannot ship whereas China is making huge profits. In my Part 3 examination…I want to focus in on the continued trade war that is going on with China. This container crisis is an off shoot of the bigger crisis…The US-China Trade War. And with that, I will see you on the road.


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