7 Things To Know About How The Global Shipping Crisis Is Impacting Inflation And The Economy Photo: The container ship Hanjin Boston is unloaded at the Port of Los Angeles Sept. 13, 2016. Container ships run by South Korean shipping company Hanjin have begun unloading at the ports of Los Angeles and Long Beach, Calif., and other ports worldwide despite the company's ongoing bankruptcy case. South Korea's Hanjin Shipping says it has received $44.6 million from its current and former chiefs to relieve its global cargo crisis. (AP Photo/Reed Saxon)
As the all-important Christmas shopping season approaches, retailers worry that a global shipping crisis will leave store shelves empty, send prices sky-high, and impact inflation and the U.S. economy.
“Right now, you know, it’s a huge problem,” Commerce Secretary Gina Raimondo told ABC affiliate WKOW-TV. “Companies have been able to keep up, but it’ll be more of what we’re seeing — essentially, higher prices.”
It’s not only e-commerce and brick-and-mortar giants that depend on the Christmas season for a huge chunk of their annual profits. Many small retail businesses rely on the holiday shopping season to survive.
“The end-of-year holiday rush is, without a doubt, the single biggest money-making period for retailers across the country,” according to small-business software provider Womply.
Shipping issues are so severe that some big retailers are taking drastic measures to make sure there’s enough supply to meet the Christmas demand.
Here are seven things to know about how the global shipping crisis is impacting inflation and the economy.
There’s a bottleneck of ships at ports worldwide. Hundreds of container ships are lining up waiting for access to overloaded ports, mostly in the U.S. and China.
A labor shortage is part of the shipping problem. In Europe and the U.S., truck driver shortages mean it is harder to move containers to their destinations once they’re on land. Also, port closures caused by the pandemic have exacerbated the traffic jam, BBC reported.
Some of the busiest ports in the U.S. expect congestion at maritime gateways to continue into 2022, The Wall Street Journal reported.
U.S. ports have experienced some of the worst bottlenecks in more than a decade throughout the covid-19 pandemic. On Sept. 14, 56 container ships were stuck outside California ports, Business Insider reported. Ports in Los Angeles and Long Beach account for about a third of all U.S. imports
Experts say the current shipping crisis will affect products being shipped out in time for Christmas.
Top toymakers, for example, think their products will be harder to find and more expensive this holiday season because of high shipping costs that typically get passed down to consumers.
“We do see inflationary pressure in freight costs in ocean freight cost and material,” Ynon Kreiz, Mattel’s chairman and CEO, told WKOW-TV. “We have to address that.”
Christmas trees and decorations are also expected to cost more, in some cases by double-digit percentages.
Some big businesses have opted to purchase their own containers and charter ships independently instead of waiting for shipping to get back to normal, BBC reported. Among them, the U.S. retail giants Walmart and Home Depot and the Swedish furniture brand Ikea.
A spokeswoman for Ikea said that the company has bought additional containers and chartered vessels to redress a product shortage.
“We have also sent goods by train from China to Europe and we have invested in temporary intermediate warehouses in China, Vietnam, India, Indonesia, and Thailand to support production,” the spokesperson said.
Costco –which is already dealing with major delays in toys, computers, tablets, and video games — is also chartering ships and renting containers to transport inventory between Asia, the U.S., and Canada, WKOW-TV reported.
Stakeholders are preparing the public for empty shelves at Christmas. “I have a gut feeling that… we’re going to see empty shelves,” said Stavros Karamperidis, head of the Maritime Transport Research Group at the University of Plymouth, in a BBC report.
Once the shipping containers arrive, there are not enough truck drivers to take them to their destinations. Add to this the shipping delays, and products just might not make it to the stores by Dec. 25.
“We have deployed more vessels and containers than prior to the pandemic, yet we still see unfortunate delays leading to missed sailings and missed capacity,” said Concepción Boo Arias, a spokeswoman for Maersk, the largest shipping container line in the world.
Higher shipping prices, shipping delays, and lack of products are leading to higher prices for consumers.
Costco and a long list of retailers have warned that escalating shipping prices and the accompanying supply chain issues will jack up prices for consumers.
The cost to ship containers overseas has soared in recent months. Shipping a 40-foot container from Shanghai to New York cost about $2,000 just before the pandemic. Now, it costs $16,000, according to Bank of America. Companies are expected to pass the costs on to consumers.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
Port of Long Beach Executive Director Mario Cordero told “Mornings with Maria“ that higher prices for transportation and shipping will “be passed down to the consumer.”
Cordero noted that the “supply chain is definitely disrupted and has been for some time” and, therefore, the “situation is in a crisis mode,” Fox News reported.
Federal Reserve officials recently conceded that inflation will be higher in 2021 than they had anticipated. However, they still see prices settling to a more normal range just above 2 percent in the coming years. Supply shortages and higher shipping costs added to the rapid increase in goods inflation, The Wall Street Journal reported.
Shipping delays not only mean that prices of products are going up, but the cost to consumers to mail and ship things is going up as well. FedEx recently announced that it will hike shipping rates 5.9 percent for domestic services and 7.9 percent for other offerings, CNBC reported.
UPS and the United States Postal Service said they also plan to raise rates.
