Flexport Says Cargo Crisis Easing
The data says that cargo logistics are untangling, but that things are not back to pre-COVID patterns, Flexport officials shared during a webinar that asked if the cargo crisis is over.
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At its worst, it took 110 days from the factory, farm or distributor to getting on a boat. Before the pandemic, it was 55 days in Asia and 45 days in California. Now it's about 85 days.
Attendees of the Sept. 29 webinar split on what the most painful consequence of the cargo crunch was. About 23% said it was when containers didn't arrive on time; 29% said the spike in spot prices; and 38% said it was difficult to either get bookings or get goods delivered.
The prices issue has been resolved, according to Sanne Manders, chief operating officer of Flexport. He said that prices are collapsing, and that the rates are getting close to 2019 rates, though there are fuel surcharges in air cargo, and there are increases in prices due to ocean carriers needing to use low-sulphur fuel. But he said if you back out the fuel effect "it's basically the same rate" from Asia to the West Coast as it was before the crisis.
What caused the problems was a combination of closed ports and factories because of COVID restrictions in China or elsewhere, and a spike in demand for goods, particularly durable goods, such as furniture, computers and televisions.
"The driving force of the logistics crisis is we had this really unusual and persistent demand for goods, especially durable goods," said Phil Levy, Flexport's chief economist. At the peak in the summer of 2020, Americans were buying 35% more durable goods than they had 14 months before.
"That’s an astonishing increase," Levy said. There had never been such large swings before.
Manders said there is still sustained high demand for durable goods. "This is puzzling to us," he said. "Is it going to calm down at some point?"
There are still pain points in Europe and the U.S. -- rail into the Midwest and too-full warehouses.
Manders said companies may hold more inventory from now on because of the expectations of e-commerce shoppers. He said traders learned we need more resilience, including more than one source of goods.
He added that "resiliency is important, but it needs to be affordable. You can’t just have way too much inventory."