Worth a read
Articulates distribution issues from the perspective of trucking freight, with bottlenecks in multiple supply chain points.
There was a discussion at work today about the price of steel from our suppliers increasing almost 60% this year. Another increase is expected to come in October.
Hasn't been too often that steel is unavailable though, it just costs a lot more.
Massive consolidation occurred in the shipping industry globally resulting from the gfc. To the point where 4 major lines now control about 85% of trade on the major routes. So the lines are disinclined to bring vessels into service (or back into service) despite what they may say. We've just sent a 40' container from Saigon to Spain. Last Marxh say this cost usd 4000. This one cost usd 14000. And we were lucky to get the slot. It's a big deal globally.
Just read about "Uprecedented/Abnormal/Astronomical shipping crisis" that could be the cause of a lot of these shortages. World container shortage as per #@PortfolioPlus
In summary:
* shipping companies had slowed their investment in ships pre2019 due to falling profits, therefore there are fewer ships on the sea now. It takes 3yrs to build a ship.
* The Drewry World Container Index for instance has seen prices climb 370% to US$9371.30 a day per 40 foot container. And that’s an average.
* Increased demand in Trans-Pacific trade route (up 40% compared to preCOVID) - diverting ships away from less profitable routes like Australia. Most favourable routes would be Asia to US, Asia to EU. Getting approx 3 times what they would get for Aust.
* Aust is on the outs with China. Usually ships bring imports to Aust, then on its return journey get filled with exports. Austrade is telling aussies to diversify our customer base, but shipping routes don't want to do India or Middle East because they can get more money just getting the container back to Asia then sending them to US/EU.
* A ship carries only so much weight. So economics is determining that carrying 13 empty containers (27tonne) back to China, is preferable than carrying one full container (27tonne) of exports to China.
* Ports are not immune to COVID outbreaks and staff shortages. Industrial action between Aust wharfies and port terminal operators.
* Lots of congestions around ports (plus Suez canal incident) since most containers seem to be going to US/EU, all added on top of increased demands caused by govt stimulus across the globe.