'Tsunami of Freight' Points to Supply-Chain Holdups Lingering Past Spring
Traffic jams at America's ports, railroad terminals, and trucking centers all indicate that the supply headaches you suffered last year are likely to continue until deep into spring. Products from China that you sell are most at risk, but goods produced in North America also are having issues that won't go away soon. Sky-high lumber prices and continued adjustments due to Covid just aggravate the pain.
"I've never made as much money as I did last year," one dealer told me recently. "And I've never enjoyed it less."
Only 22% of container ships arrived at West Coast ports on schedule in December, down from 71% the same month in 2019. The average delay in days overdue more than doubled to 8. For much of this year, there have been more container ships at anchor in the Los Angeles-Long Beach harbor than there are ships that had docked and were being worked. Those vessels almost certainly contain lights, fasteners, flooring, electrical equipment, tools, and consumer goods sold at construction supply companies nationwide.
Normally, the Lunar New Year would lead to a slowdown in traffic because Chinese factories would close for a week-long holiday. But this year they're staying open, contributing to a "tsunami of freight," as one publication put it, in which all transport modes are struggling to handle huge volumes of goods. Just about all of the 1.8 billion square feet of industrial and distribution space in Southern California is being used.
"Supply chains are full and backed up, and every new unit of inventory is more expensive than the last," FreightWaves economist Anthony Smith said in a Feb. 9 webcast.
Terminal operators at the ports of Long Beach and Los Angeles predict it will take between April and June for the backlogs of vessels to dissipate. They'd better, because shipping volumes typically peak in August and September, when holiday goods start to arrive on U.S. shores.
While dealers naturally think of shortages in terms of lumber and other goods produced in North America, builders use lots of products produced from abroad. Thus, even as North American producers slowly ramp up production of framing and exterior features, the pace of finishing homes still could be slowed by a lack of what goes inside. Considering the supply-chain issues involving both the building envelope and its interior, it's no surprise that product shortages are builders' No. 1 worry these days, as a recent NAHB survey shows:
As for trucking, expectations of strong continued demand have led shippers to pursue contracts rather than rely on the spot market. One result has been that contract rates now exceed spot rates for the first time in seven months.
J.B. Hunt Transport Services predicted shipper costs will rise more than 10% this year for intermodal service in certain U.S. markets--particularly the Southwest, where cargo containers from China are brought in via ship and then transferred to trains and trucks for delivery inland. The intermodal industry's total volume rose 8.7% last year, the Intermodal Association of North America reports.
Freight volume by trucks nationwide is up 37% over the same period last year, FreightWaves reports. A record number of trucks are on order, but they are unlikely to reach drivers until much later this year.. "There aren't enough trucks to cover all this freight," Smith said.
(By the way: There's also a shortage of TEUs, such that the U.S. Federal Maritime Commission has complained to the World Shipping Council that some ocean carriers were sending empty TEUs back overseas after they were unloaded rather than having them go inland, where the American agricultural industry could fill them with commodities for export to Asia.)
On the rails, U.S. carloads of forest products are up 1.7% for the first five weeks of 2021 to 50,328 carloads, according to the Association of American Railroads. Forest products include primary forest products, lumber and wood products, and pulp and paper products. While higher volumes normally would point to lower prices per unit, the opposite has happened this month, with prices for many commodities at or near record highs. Meanwhile, futures prices have reversed course from the start of this year and are nearing record territory above $1,000.