The following video is brought to you courtesy of the Epic Economist YouTube Channel. Click the video below to watch it now.
We’re heading to a new year, but our old problems aren’t going away. In fact, according to several industry leaders, Americans haven’t seen the worst of shortages and price increases just yet. That’s because the ongoing supply chain bottlenecks that have been disrupting global trade for almost two years are likely to persist through the entire year of 2022, and possibly extend until late 2023. A new report just released by insurers Euler Hermes and Allianz pointed that supply chain problems around the world are expected to intensify in 2022 due to renewed virus outbreaks, China’s strict virus containment policies, and extreme weather. But disruptions can last even longer in the U.S. due to a lack of investment in shipping infrastructure capacity, the insurers predict.
Short-term shipping contracts and spot prices rocketed to the highest level ever ahead of this year’s Christmas. Another company known as TASNEE, one of the largest manufacturers of car batteries in the world, revealed that on the week ending on December 10, shipping prices jumped by 700 percent compared to the same time in 2019. Due to a shortage of available containers, and given that China has stopped the production of new containers amid nationwide factory closure orders, the rental price of a single container climbed from $800-1,200 to $7,500-8,500 on the spot market.
The big problem is that only industry giants, such as Amazon and Walmart, are able to close long-term contracts or charter their own vessels to fight those volatile shipping costs. A 700 percent shipping price hike means hotter inflation and more acute price spikes at the stores. Considering that over 90% of the world’s merchandise is shipped by sea, we are going to feel the impact of this extraordinary increase right in our wallets. And the worst part is — although some of this jump in shipping costs may be seasonal, the chief analyst at the freight rate benchmarking platform Xeneta, Peter Sand, says that container shipping costs aren’t likely to normalize before 2023.
“This means the higher cost of logistics is not a transitory phenomenon. For inflation, that means trouble. The element of shipping, in overall prices, small as it may be, is much bigger than ever before, and it could be a permanent lift to prices going forward,” Sand warned. Last month, a United Nations report sounded the alarm about the impact of higher shipping and freight rates on consumer prices. It said that the container crisis might derail the global recovery and boost import prices by 11% at the beginning of 2022. The report also noted that the price of cheaper goods will disproportionally rise compared to the price of more expensive items.
On the other hand, there’s a 50 percent shortage of truckers in the ports. Roughly 4,000 positions remain vacant, according to Seroka. Many truckers don’t want to wait for hours in extremely long lines only to be refused entry for failure to report on time. The fact that the Los Angeles port is not operating is not operating at full capacity is undermining efforts to ease the backlog. Several ships are being diverted to the nearby port of Oakland, which is already congested as chaos roars in LA and Long Beach.
Approximately 75 cargo ships, the highest number in six months, are waiting to get unloaded in the port. With transit times for vessels arriving from Asia in the ports of LA and Long Beach more than doubling to 62 days compared with 2019 levels, nearly 7% more imports are being handled by the Port of Oakland. In contrast, export volumes declined 9.4% due to lack of ships heading to foreign markets, the port said. This entire situation is affecting consumers much more than they realize. Surging transport costs and rampant inflation costed millions of Americans more than $3,000 in additional expenses this year, according to a Penn Wharton University of Pennsylvania Budget Model analysis published on Wednesday.
The PWBM, a nonpartisan research-based initiative, estimates that the record levels of inflation will require the average U.S. household to spend at least $3,500 more in 2022 to achieve the same level of consumption of goods and services as in 2020 or 2021. This entire situation is affecting consumers much more than they realize. Surging transport costs and rampant inflation costed millions of Americans more than $3,000 in additional expenses this year, according to a Penn Wharton University of Pennsylvania Budget Model analysis published on Wednesday. Unfortunately, we’re moving towards another painful year, and our leaders’ lack of action are only worsening the current economic outlook. The devastating inflation crisis economists have been warning about for months is here, and the months ahead are going to be more chaotic than most people would dare to imagine.
https://www.epiceconomist.com​”
