The supply chain crisis has brought record profits to the shipping industry, the enemy

Think of Xu Yaping’s fragile sword and the plight of counterfeit Barbie dolls.

These toys are exported from the International Trade City (a wholesale market the size of 1,000 football fields) here, and have been shipped all over the world by sea for many years.But the once fast and cheap shipping network-which accounts for 90% of global trade-has been overturned by the pandemic and supply chain tightening Stirring the ports of Los Angeles and Long Beach.

In the maze-like narrow stalls of this global fortress, Xu watched her profits plummet: a container full of $24,000 worth of toys to North America now costs the $1,250 she paid before the pandemic. More than 10 times. The customer is canceling the order. The remaining people buy only a small part of what they had previously purchased. Others are waiting for freight rates to drop.

“They would say:’Ah, it’s expensive now, so let’s wait a few days,'” Xu said. “Then they will continue to wait and the freight will continue to rise.”

For decades, Hyundai Shipping has been supporting global trade in relative obscurity, usually beyond the scope of government regulatory agencies, and hidden behind the veil of efficiency and reliability, reducing storage costs by delivering goods “on time”-this is caused by Toyota’s first inventory system and adopted globally. This is no longer the case.

Businesses dominated by a small number of European and Asian players now find themselves in the center of the logistics chain, which shows Few signs of improvement, Leading to the highest inflation rate in the United States since 1990, and triggers such as medical supplies, Semiconductors, tires and toys.

Jason Chiang, Director of Ocean Shipping Consultants in Singapore, said: “These companies have made enough money in a year to pay for any investment they have made in the past 10 years. This is not a crisis of their creation, nor a crisis of their economic harm. .” A major transshipment hub. “A complete voyage is enough to earn back the cost of the entire ship. It’s like taking a trip as an Uber driver and getting the value of a car.”

But supply chain issues are drawing people’s attention to this industry, and generations of people in this industry have raised concerns about fair competition, workers’ treatment, and environmental damage. Shipping companies face a critical moment, either to maintain the model that made them vulnerable to booms and depressions, or to adapt to a world that requires larger ports, larger warehouses and distribution infrastructure, and more low-carbon ships. What they choose may determine how the world economy responds to the next global crisis.

“What are we going through now…no one has seen it before,” said Otto Schacht, head of maritime logistics at Swiss freight forwarding giant Kuehne and Nagel, Told recently Lloyd’s List, a 287-year-old British shipping magazine. “It’s like the famous black swan theory. There is no black swan, and suddenly there is a black swan. I think we realize one thing: things won’t be the same as they used to be.”

Shippers should not hope. An industry with an estimated 5,500 container ships was caught off guard during the first COVID-19 blockade last year. Their sailing schedule was cut and disrupted the positioning of the fleet.A year later, when Americans were flooded with stimulating cash and started to spend wildly, there were not enough ships to satisfy Explosive demand.

Container ships are anchored near the coast of Los Angeles and Long Beach ports, and many containers are stacked on land.

The container ship stopped on the shores of the ports of Los Angeles and Long Beach, waiting to be unloaded. On October 13, the containers were stacked on nearby land.

(Allen J. Schaben / Los Angeles Times)

Exporters, freight forwarders and retailers began to compete for the dwindling space of Asian freighters. Some companies, such as Amazon, Wal-Mart, and Costco, resort to renting their own boats. Every capable container ship is put into use in a battle similar to Dunkirk to reach American consumers.

When the fleet arrived in Southern California, the ship found that the port had too few berths and workers, the warehouse space was full, and the truck drivers and chassis were almost inadequate to handle the fast-stacking containers.An unprecedented number of 70 or more ships are now regularly floating in the waters outside the busiest port complex in the United States – this bottleneck is expected to continue to exceed Busy holiday.

Peter Sands, chief analyst at Xeneta, a Norwegian freight industry analysis company, said: “Everything is beyond the normal balance. It will take more than a year for global logistics to relax.”

To make matters worse, the shortage of containers has been plagued Asian exporters. According to data provided by IHS Markit, the steel box carrying the Xu’s sword and the counterfeit Barbie doll is returning to Asia every four times to the United States.

The deadlock caused transportation costs to hit a record high. The Shanghai Container Freight Index is a closely watched indicator that measures the shipping costs of China’s ports. Compared with the same period two years ago, it has soared by 449% in early October.

The setting sun illuminates dozens of container ships in the ocean off the coast

The sunset illuminates the container ships in the ports of Los Angeles and Long Beach, waiting to be unloaded on October 13.

(Allen J. Schaben / Los Angeles Times)

“It was a perfect storm,” said Nathan Resnick, president and co-founder of Sourcify, a San Diego-based company that connects American entrepreneurs with Asian factories. “Small and medium-sized companies are trying to understand that they pay so much for shipping.”

No harm to everyone. A series of problems have brought extraordinary benefits to shipping giants such as Denmark’s Maersk, France’s CMA CGM, Germany’s Hapag-Lloyd, and China’s COSCO. They are expected to achieve ten years of gross profit in just one year.

Drewry is a maritime research and consulting company, estimate By the end of 2021, the net profit of container shipping companies may total as high as 100 billion US dollars, three times the forecast in March, and put these companies in the same alliance with corporate giants such as Apple. They are not sleek, but the ships that are loaded with cargo and cumbersomely crossing the sea remind people that the old world methods are essential to the new world order.

Jiang said that the timing was very good. A large freight liner invited suppliers, customers and other partners to a typical serious event to commemorate the recent quarterly earnings report and presented GoPro cameras as gifts to attendees.

Although prices will eventually fall, shippers are seizing the current chaos and locking customers in long-term contracts. This trend is putting greater pressure on low-margin exporters such as Yiwu International Trade City. “Small businesses like us don’t have that kind of cohesion,” said Xu, a toy exporter.

The consequences of this reality are reflected in this huge market, where the floor is divided into a part dedicated to cosmetics at one end, and buttons and zippers at the other end. Animal slippers, beaded necklaces, keychains and disposable razors are lined up in a row, ready to be sold, each for only a few cents.

“If there is no long-term stable order, we may not be able to do this,” Xu said.

The sudden luck of the shipping route has led to accusations of huge profits, which has aroused scrutiny by the government and manufacturers.British trade groups call on the country’s competition and market authority Investigate “cartel-like” pricing In the shipping industry.

The Biden administration signed an executive order in July to encourage the US Federal Maritime Commission to prevent the shipping industry from charging US exporters the “excessive fees” required to load and unload cargo.

“In 2000, the 10 largest shipping companies controlled 12% of the market,” the White House said In the statement. “Today, it has exceeded 80%, leaving domestic manufacturers who need to export goods at the mercy of these large foreign companies.”

Critics say that the industry’s overall strength and lack of government oversight have created blind spots that allow shipping companies to slow their transition from high-cost sulfur marine fuels and avoid improving the working conditions of seafarers, leaving hundreds of thousands of people unable to do so. Stranded on the ship The border is closed due to COVID-19.

The United States and 18 other countries pledged on Wednesday to curb emissions from the shipping industry, which accounts for 3% of the world’s carbon dioxide emissions. The pledge was made during the United Nations Global Climate Summit, and aims to eventually shift freighters from fossil fuels to cleaner energy sources in order to create a zero-emission channel.

The shipper’s new financial strength is unusual for a company that is capricious and connected with the whims of the global market. It can take years to build a cargo ship, which is why the industry often orders too many new ships when conditions are good, and is under pressure from oversupply when conditions are bad.

“The history of this industry has ups and downs,” said Willy Shih, a professor at Harvard Business School who studies supply chains. “When the capacity is too large, everyone loses their shirts. They are now trying to make up for all those unprofitable years, but I think this is unsustainable.”

Container ships unload at the Port of Los Angeles, and trucks line up to receive containers.

On October 13, the container ship unloaded at the Port of Los Angeles, and trucks lined up to receive the containers.

(Carolyn Cole/Los Angeles Times)

Analysts say that orders for new ships are filling up, but shippers are also investing money in other areas.CMA CGM Said Wednesday Spend 2.3 billion US dollars to buy all the shares of the third largest terminal in the Port of Los Angeles. Maersk is buying jetliners and Expand its air freight And land transportation business, which is part of a broader strategy to provide door-to-door services provided by companies such as DHL, UPS and FedEx. The world’s largest container shipping company has also ordered 8 ships that can use carbon-neutral methanol in an effort to achieve the goal of achieving net zero emissions by 2050.

In the post-pandemic world, calls for more resilient and environmentally friendly supply chains may continue to raise questions about shipping.

“I hope this attention will last,” said Ross George, who described in detail in a book titled “Ninety Percent of Everything” her five weeks on a container ship to inspect shipping for humanity and Damage caused by the environment.

She said: “Anything that makes us think about where things come from, and the cost of making the world always supply everything needed in a timely manner, can only be a good thing.”

Pearson, a staff writer for The Times, reports from Singapore and Su from Yiwu.

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