I saw a business news item today with a chart showing Container shipping price indices. The indices were generally stable in the $2000 to $3000 range from 2011 through 2019, then shot up to a current $11,000, ouch! One would conclude that whichever entity is paying the freight (the manufacturer or wholesaler), they can’t afford to do business with these shipping rates.
Jim
Supply chain has been a mess.
Jason Shron at Rapido has made reference to this. I believe Rapido has four, maybe five* products that are still “on the water” awaiting landing.
(* I just reread the newsletter. There’s actually a dozen products that have left the factory and have not arrived in a N.A. port)
The new normal —
Regards, Ed
Train stuff is pretty high-value cargo, so the shipping costs have less of an impact than for low-value. Imagine how the folks feel who ship produce in refrigerated containers.
You can put, very roughly, 33,000 pieces of HO rolling stock or locomotives in a container. The increased shipping cost per unit is 26 cents. That’s figured by volume. I ran it also by weight (for a locomotive), and it’s (again) very roughly the same as for volume.
I suspect the problem is getting a container for your product AT ALL.
If I owned a container, I just might raise my rental rates to help out my retirement fund.
I don’t think this is “the new normal”. I think it’s temporary, while the world adjusts itself to Covid.
Ed
In one article I read, one company stated rates for a container from China went from $4600.00 to $26000.00 almost overnight and have settled down a bit to around $15000.00.
I have owned containers in the past and received a guaranteed 15% minimum return and actually got about 18%. You can also own railcars for lease. Like anything, it is something you need to understand before going in. If I was a lot younger I would be looking at that industry a lot closer.
When I order something from Amazon, if the expected delivery is more than a week, I figure it is coming from China and don’t bother buying it. Haven’t had to buy any MR stuff lately so this supply chain thing hasn’t affected me…so far.
There’s a shortage of ships. Shipping companies idled some of their fleets last year not anticipating that trade volumes would increase rather than decrease due to the pandemic. Shipbuilding has consolidated and total new tonnage built has not kept pace with demand (this is not unusual). Unloading has slowed dramatically both at docks (container ports) and through shortages in surface mode transhipping.
Ships with full containers can’t unload fast enough. Those ships sit at anchor if arrived and sail more slowly if still at sea. It’s cheaper to keep moving on the ocean than to sit at anchor (demurrage can be expensive). Empty containers pile up because there is no capacity to return them to where they’re needed. At port of Los Angeles there are 65 ships currently at anchor waiting for a loading berth to take off the containers, this is apparently a record. Multiply that by the average TEU and divided by 2 gets you an estimate of how many full 40’ ocean going containers are in effect idle floating warehouses.
This is pretty much all due to covid regulation as much as the effect of the illness itself. Far more problems have been created by keeping well people from working than from the illness keeping people from working.
We cannot ever recover the loss of productivity. The supply chain issues will resolve themselves probably through higher pricing reducing demand.
Perhaps it is time for ssome North American companies to bring production facities home!
I saw this coming and bought acordingly. Also a lot of the delay is getting workers. On the west coast area I live In and Out fast food has starting saleries as high as $21 and no one else can find employees either.
Sounds good at face value but domestic production costs would cause the turnout prices to be much higher.
Atlas used to make its track here…and there is always Mexico.
I was at Ikea today to buy shelves for the train room. No Ivar shelves of any description. A month ago there were hundreds in stock. University students furnishing residence rooms or apartments maybe? If Ikea supply chains are getting disrupted we are in trouble, deep trouble.
The shelves are full at Home Depot.
All of the Halloween, Thanksgiving, and Christmas seasonal items are already on hand.
There is no evidence the sky is falling.
-Kevin
Or it might not make a difference at all. I know people who work in US manufacturing, making stuff in the US, out of components made in the US. Except their boxes are printed overseas, so they can’t ship in the first place.
Ikea had a couple of hundred containers on that ship that got stuck in the Suez Canal. Who knows if they have ever been released.
Not according to people like Jason Shron of Rapido. If there was no difference in production costs her vs. China, then why isn’t more being produced here? Seems like a no brainer.
From what I read, that was all settled.
Remarkably, Ivar is made in Sweden from sustainably grown softwood. How they do this so cheaply is a mystery.
No mystery, for over twenty years nearly the entire Ivar line has been made in China or Vietnam.
Pretty much the last Ikea hard line furniture products available in North America and manufactured in Sweden are the Billy and Malm series.
Lots of upholstered products are also made in Sweden, but the number of Swedish country of origin SKUs are falling.
Everything is still designed in Sweden, but manufacturing has been shifted to the developing economies of the world. That is why they use the phrase “Ikea Design And Style” or something like that now.
-Kevin
Perhaps the shipping costs are one reason, but I doubt it is the only one. What about lack of supply?
I was referring to shortages and disruptions. There’s no way to fully insulate your product from the global supply chain.