Freight Report February 2022

Freight and supply chain issues are a common concern for hotel hospitality, as renovations, replacement goods, and conversions are reliant not only on when the goods arrive but how much it will cost to get them. Once a month, we will run you through where costs are at so you can better prepare and plan your budget and timeline for your next renovation project.

Current Ocean Freight Rates

China/East Asia - North America West Coast: $15,218
China/East Asia - North America East Coast: $16,745
Northern Europe - North America East Coast: $6,708
Northern Europe - North America West Coast: $8,401
Global Avg: $9,660
Domestic Into 2022: +5.25

• Recent partial caseload quote called out $2500 for domestic and $11,000 for ocean freight.

Schedule Reliability

What is this?

1. This is when the ship communicates with the port on when they are going to be arriving so that the dock can be ready. Once communicated the port will start moving containers into position to be loaded as soon as the ship arrives.

Right now this communication has broken down and it is causing this freight crisis that we are in. Currently, the Schedule Reliability is sitting right around 32.0% which is much lower than normal levels.

Essentially, the ships are calling the ports telling them that they will be there in six days but don’t show up until the twelfth day. The port takes that 6-day notice and moves the shipyard queue around to accommodate the arrival of that ship. When the ship misses its day for loading, the port now needs to rearrange the containers to accommodate the other ships they have scheduled to load. Now imagine this is not only one ship but multiple ships and you can see how this becomes a big problem. Luckily as we see more and more people return to work and the pandemic restrictions being lifted we should see this problem start to diminish.

Why does this cause issues?

1. The demand for container space is high but the supply of that space is currently very low. Which is making the cost of that space skyrocket.

Trucker Shortage

There is currently a trucker shortage in the U.S. A shortage of 60,000 to be exact and they aren't coming back. Most of these truckers were able to retrain or find a new job during the pandemic. Now as we head into the fruit and vegetable season down south we are going to see another tightening of available trucks for pick-ups outside of this industry.

Is the trucker protest in Canada growing?

1. Right now there is a 50,000-trucker protest happening along the U.S./Canadian Border around Ottawa and it might be getting bigger. Why is this protest happening? Because of vaccine mandates. U.S. truckers who are not vaccinated, which is about half of all U.S. truckers are not allowed to enter Canada as of January 15th, 2022. Most of the goods that the truckers are bringing over the border this time of the year are food. Consequently, we can expect shortages of perishable foods, like produce and meat, everywhere.

Is the protest growing? The answer is yes. This protest is growing and the U.S. version of this “Freedom Convoy” is expected to get off the ground in March. Two weeks ago there was a Facebook group that was removed by Facebook for the U.S. version and within two days it had 160,000 members. Are 160,000 truckers in the US going to protest? Highly unlikely, but if even a fraction of that number goes live we are going to see another tightening.

Topic Raw Materials—price increases are here and they are here to stay.

1. Prices for raw materials are rising and on a steady track to continue going up. Most of the products that we sell are made of wood, cloth, and metal—all of which have price increases and volatility at the top of these high prices. Meaning that instead of sharp price jumps lower we are seeing these sharp price jumps upwards towards higher prices.

This chart shows us the price of lumber over the span of 2019 up until today. We see a normal spike in prices during the summer months when most of the home and outdoor projects are being done and a dip during the wintertime. However, what’s important is noticing that the price of wood hasn’t come back to pre-pandemic levels or anywhere close to them. Piling on to that we are seeing steep movements in the price when it does change. Until this market stabilizes we are going to see case goods and seating prices change often. You can also apply this same model to lighting, bedding, and window treatments.

Current Vendor Lead Times and Estimated Freight Cost

Conclusion

Should we expect the movement of goods to get better? Yes, the pandemic restrictions are slowly being lifted in many places. People are going back to work and things are moving again. Should we expect to see product prices and freight prices fall during this time? No, the demand to ship items has never been higher. The reality is that many suppliers have a large amount of backlog of items waiting to be shipped. With a revitalization of production that had been static a year ago, many businesses are now scrambling to get materials from understaffed or reopening mills and mines.

Sources:

1. https://fbx.freightos.com
2. https://www.sea-intelligence.com/press-room/113-schedule-reliability-continues-to-be-under-40-in-2021
3. https://www.marketplace.org/2022/02/02/rising-commodity-prices-suggest-more-inflation/
4. https://www.cnbc.com/2022/02/08/why-the-us-is-facing-a-paint-shortage.html
5. https://www.bloomberg.com/news/articles/2022-01-19/fruit-and-veggie-outages-in-canada-get-worse-with-trucker-shortages
6. https://www.freshfruitportal.com/news/2022/02/14/u-s-trucker-shortage-worsens/