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Extreme port congestion is causing serious systemic failures across the entire U.S. supply chain as the global shipping crisis continues to get worse. Industry executives are warning that the unprecedented backlog of containers won’t go away this year, and it could become one of the biggest problems of 2022. According to Goldman Sachs, “backlogs and elevated shipping costs are likely to persist at least through the middle of next year”. “No immediate solution for the underlying supply-demand imbalances at US ports is available,” the bank’s economists concluded in the latest research report. That means more headaches are coming for the economy and American consumers because supply chain bottlenecks are pushing prices up, delaying shipments and deliveries, and leaving shoppers with limited options.
Over the past year, consumer prices have risen at the fastest pace since 2008. Overall inflation jumped nearly 6 percent, according to official numbers, but non-official figures point to a spike of roughly 14 percent. The amount of out-of-stock products in online platforms rocketed by 172 percent compared to the same period in 2020, Adobe Analytics data showed. Now, the most telling evidence that more shortages, price increases, and disruptions are about to emerge is the immense backlog of containers stranded off the Ports of Los Angeles and Long Island. Estimates suggest that over one million containers are sitting in more than one hundred cargo ships that are waiting to get offloaded outside the two ports.
Nationwide, including the ports of Savannah, New York, and New Jersey, at least 1.5 million containers that are sitting in 171 cargo ships are still waiting to dock, and these figures continue to escalate as more and more ships arrive with holiday goods. Outside the California ports alone, Goldman estimates that there is a shocking $24 billion in goods stuck in those containers. The U.S. is currently experiencing the worst phase of the shipping crisis so far.
In an attempt to alleviate this crisis, the White House announced that ports will implement 24/7 operations until the end of the year. However, due to a severe labor shortage, that may only aggravate the problem since there’s not enough personnel to move those goods around. Goldman also found that it takes three times more than normal to unload a single container due to the lack of qualified workers to properly handle the cargo, operate forklifts, and drive trucks. And if you think port congestion is intense right now, just wait for what comes next. On Wednesday, several industry leaders attended the National Shippers Advisory Council inaugural meeting. Early this week, the ports of Los Angeles and Long Beach announced that from November 1 on, there will be a $100 charge for containers dwelling nine or more days that move by truck and those dwelling six days or more that move by rail. The fee will increase by $100 every day, and it will be charged to carriers, which will certainly pass the fee along to shippers, which will then pass those increased costs to consumers.
According to Daniel Miller, global container lead at Cargill, California’s emergency charges are “crazy fees” that will only make everything more expensive. “We know this is all going to come back to us. I had a couple of calls with carriers yesterday and they’ve already admitted that yes, they are going to come back to us.” According to Miller, “I don’t think anybody on this committee would admit to using the port to let containers sit there because they want to. Everybody has the full intention to get these containers out, but they physically can’t.” At some point, the problem starts to feed on itself, and of course, those who will ultimately pay for these fees will be the end consumers. This is yet one more example of ineffective government policies that are only aggravating a crisis that is already pushing the price of everything up.
We might enter 2022 in a far worse state than we’re now. And what’s truly alarming is that most Americans have no idea of the true scope of this crisis. They don’t imagine how hard the challenges ahead are going to be. We will be lucky if further disruptions don’t emerge in the coming months. Neither the short-term nor the long-term outlook seem promising. We’re moving towards a turbulent era of broken supply chains, hyperinflation, and widespread shortages in proportions never seen before. So you better be prepared before things start to spin out of control.