International commerce overview shows spiking rates

Our friend Stu Follen with S.L. Follen Company in Portland provided us with a comprehensive look at international commerce this year, and the facts are astounding.

By Stu Follen

Overall 2021:

Since late 2020, international shipping has been experiencing container shortages, sailing delays and rising rates. Over the course of 2021 the situation has become worse monthly. Container rates on imported containers from Europe have risen over 700 percent.  Export rates have, on average, doubled to tripled.

In addition, U.S. ports are not able to handle the volume of imports, which in turn affects the ability of the ports to handle exports.  Delays of six weeks are not unusual these days.  I am sure you have seen the news – the port of Long Beach is averaging 60-plus containers “at anchor” daily.  These vessels cannot get into Long Beach to discharge cargo or re-load export cargo.  Oakland, Seattle/Tacoma are in the same situation, only the numbers of waiting vessels are lower (due to being smaller ports).  

Main cause of shipping issues:

• Too many imports coming into USA (record volume due to COVID delays)
• Not enough port labor to handle the volume
• Not enough trucks to take the containers off the port
• Rail service is overwhelmed and does not have enough service or capacity to efficiently move cargo from the ports.

Effect on imports:

• Rising costs for all imports. 
  • November 2020, a 40-ft. dry container from China to U.S. West Coast cost $2,400.
  • September 2021, a 40-ft. dry container from China to U.S. West Coast cost $19,200.
    • $9,000 of the $19,200 was to “reserve” a container that would actually load to a vessel within three to four-week time.
  • Ag items affected:
    • Packing materials (onion bags, etc.)
    • Foreign originated machinery
    • Imported foreign produce (shipped via ocean container)

Effect on Exports:

• Exporters do not know if or when their cargos will load or if they will get containers for orders sold. 
  • There is no reliability in the export supply chain.
  • Risk of quality issues is extreme making exporting perishables dangerous.
  • Foreign buyers are looking to other countries for supply as U.S. is not reliable now.

Effect on Onions and Produce exports:

• Exports are low due to container shortages and delays
  • It is “safe” to sell small volumes and get containers but not large volume.

• Asia countries are looking to other countries to supply onions.
  • Note: Part of the reason is also due to the high cost of U.S. onions this year.
    • High ocean rates + High onion prices = High cost
• Buyers are concerned about vessel delays resulting in 2-3x sailing times and having bad quality on arrival.  Risk is too high, so they don’t buy as much.

Conclusion:

The shipping issues that affect imports and exports are not expected to significantly improve until Q4 2022.  However, ports are now trying to find solutions, i.e., working seven days per week instead of five days per week.  Or, extending hours.  However, the problems are multiple, and solving one issue will not solve the overall problem. 

Overall, the export supply chain is severely compromised.  Work is being done to solve the underlying issues, but “time” is probably the real solution.  Until the logistical logjam at the ports is improved, imports and exports will continue to suffer.

PLEASE NOTE ONIONBUSINESS WILL BE OFFLINE FOR MAINTENANCE THE WEEKEND OF OCT. 16-17 AS WE PREPARE FOR OUR NEW WEBSITE LAUNCH TO COME IN NOVEMBER.