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The Rates Our Industry Cares About
- Current Global Container Rate: $9,430
- China/East Asia to North American West Coast: $15,889
- China/East Asia to North American East Coast: $17,386
High prices are everywhere and the Russian conflict was only the tip of the iceberg
Many in the news would like to sell you the idea that fuel prices are where they are because of the Russian invasion of Ukraine. Don’t let that fool you. This problem has been in the making for over a year. Due to the current US administration's actions taken against the energy industry in the States, we are and have been seeing a steady increase in fuel cost since day one. From shutting down construction of the Keystone XL Pipeline to permits and drilling leases being revoked, the Russian conflict is only showing what reliance on hostile nations for the main driver of the world can do. It can cause bottlenecks in supply that don’t just affect Russia but our everyday people. Unfortunately, there don’t seem to be any meaningful measures put forth to mitigate this problem which is why we most likely haven’t seen the highest prices for fuel just yet.
How Does This Directly Affect My Project?
The increase in diesel prices is putting truckers and trucking companies in a tight spot. They have to decide whether to pass on the higher prices to the customer or eat them, which some smaller companies and independent contractors cannot afford. Large carriers, are handling the situation quite well and are happy with inflated fuel prices squeezing out the smaller and independent truckers. This, unfortunately, is creating another supply bottleneck that cannot keep up with the demand and with fruit season in the south about to kick into full swing we could see freight costs go even higher.
China Covid Cases On the Rise
The city of Shanghai is home to 20 million people and another major manufacturing and port location is currently going through a 2 part lockdown. China currently has a Zero Covid policy in place which is making business leaders around the world fearful of more supply chain issues. Luckily it looks like manufacturers have been taking some steps to mitigate volume issues and are able to maintain some level of stable output. Overall we will have to wait and see if the Chinese Government is going to continue with their extreme policy and whether or not the world market can plan based on this.
Schedule Reliability
This was touched on in our last freight report which I recommend going back and reading to get a better understanding of this topic. In short, Schedule Reliability is a rating that is based on when a container ship says it will be at the port and when it actually arrives. Though economists remained hopeful at the beginning of 2022 that we would start to see a return to normal on this scale it seems to be moving in the opposite direction and is hitting record lows, which means it is taking a lot longer for goods to get shipped.
Current Vendor Lead Times
| Vendor | Low Lead Time | High Lead Time | Estimated Freight Cost |
| Casegood | 8 | 14 | N/A |
| Seating | 36 (from receipt of COM) | 40 (from receipt of COM) | N/A |
| Casegood | 12 | 14 | N/A |
| Model Room | 6 (from receipt of COM & approvals) | 8 (from receipt of COM & approvals) | N/A |
| Casegood | 10 (from receipt of COM & approvals) | 12 (from receipt of COM & approvals) | N/A |
| Casegood | 12 (from receipt of COM & approvals) | 14 (from receipt of COM & approvals) | N/A |
Overall Outlook
While the world is still crawling out of the pandemic we are seeing a return to normal faster than previously thought. Even though the supply chain has not caught back up, the demand has. If common sense energy policy is put in place we could see a boom like never-before-seen, but if energy prices don’t return to some sort of normal the recovery could be dragged out through the rest of 2022 because let’s face it – the cost of energy goes into everything we do.
Sources:
- https://www.cnbc.com/2022/02/24/biden-administration-pausing-new-oil-and-gas-leases-amid-legal-battle-.html
- https://www.wsj.com/articles/small-trucking-companies-are-getting-squeezed-by-soaring-diesel-prices-11648200601?mod=business_minor_pos19
- https://www.ft.com/content/e5966ff4-a084-4d21-9d1f-8221d191e9d8
- https://www.maritime-executive.com/article/containership-schedule-reliability-dipped-to-new-low-at-start-of-2022
- https://www.forbes.com/sites/kenrapoza/2022/03/29/how-the-shanghai-covid-shutdown-will-be-used-against-the-west/?sh=620a756e6b65
- https://www.marketwatch.com/story/larry-fink-says-globalization-is-over-heres-what-it-means-for-markets-11648298038
