We’ve already seen labor settlements with port workers and truckers that will result in higher transportation costs. Now come container costs, seasonal surcharges, and even lower water levels in the Panama Canal.
It’s been a tough year if you’re in a business that needs to move its products around the country…and around the world. After the pandemic levels when ocean freight rates exploded ten-fold that part of the supply chain has come back down to pre-Covid levels but other parts of the process are making up for it.
First were the labor settlements for West Coast dockworkers and FedEx employees, which remain to be calculated but could result in labor costs increasing in the 8 to 10% range. Then UPS drivers settled their potential work stoppage and those costs are still being added up.
Now come three more situations that will impact supply chains through the balance of 2023 and no doubt well into 2024:
1. Container prices over the summer months are coming back from their bottoming out levels of the past 12 to 18 months and are on the rise again. This is nothing like the massive increases during the pandemic when the typical short-term lease rates of a container from Asia to the West Coast went from under $2,000 to as much as $25,000. Price hikes so far have been small and are mostly being absorbed by shippers but further increases could start to show up on bills of lading.
2. Land-based freight companies like FedEx have usually charged higher prices during peak periods like the holidays but for 2023 they are going to be higher. FedEx has already alerted its customers to expect to pay more for shipments between October and January, both for large, bulky items as well as Ground Economy packages. The actual amount of the increase depends on a variety of factors and in a clever bit of spin, the big delivery service is no longer calling these additions peak surcharges: they are now labeled “demand” surcharges in perhaps an indication that these higher rates could be implemented outside of the traditional fourth quarter period.
3. The Panama Canal, which Asian suppliers use to get goods to the East Coast, is literally drying up due to global climate changes. Canal operators have announced transit restrictions for at least ten more months, cutting back the number of vessels that can be handled on a daily basis due to the lower water levels. It slows travel, mostly through the numerous locks throughout the 40-mile canal. They are also asking freighters going through the canal to carry smaller loads, reducing the depth they need. The bad news: next year is not expected to be any better for the Canal and could be worse.
Until drones truly become widespread alternatives to moving packages and products, the supply chain will continue to remain…well, unchained from time to time.
Be part of North America’s largest woodworking show and conference.
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International Woodworking Fair
August 6–9, 2024
8:30 AM–5:00 PM
8:30 AM–2:00 PM
Georgia World Congress Center
285 Andrew Young International Blvd
Atlanta, GA 30313