Export Boom Hindered By Shipping Container Shortage
August 27, 2008
OSSINING, New York – As waiting lines for shipping containers become longer and shipping costs can only be counted on to rise, domestic industries (textile included) have restructured their export systems to best overcome the hurdles which prevent them from fully benefiting from a weakened economy.
The desire for U.S. products abroad has increased the demand for containers among domestic exporters. Simultaneously, the economy shift has caused a decrease in imports, thereby slowing the traffic of containers to the U.S. Simply put, as demand for shipping containers continues to increase in the U.S., their supply decreases.
David Marx, president of Express Air Freight Unlimited, Inc., said that by the end of June his company couldn't get booking for containers until August. "There is a big delay on containers," he said. "The problem is because they don't send as many containers out because they don't have much freight coming in."
"What's happening now is that the low dollar is making exports very attractive to foreigners," Marx continued. "Fuel surcharge on airfreight is getting high and shippers are looking for alternative shipping routes such as the ocean, and now there are surcharges on ocean freight in addition to delayed bookings.''
"We had a million pound shipment going in December and the customer had to wait two months in order for us to get space," he said. "This has become a major problem since the end of last year."
Stan Fradin, president of Rockland Mills, can also attest to this phenomenon. The U.S.-based manufacturer of drapery and blackout linings has had to accommodate waiting periods up to two months long. "Where before we were able to book [a container] that week, we are now having to book six to eight weeks in advance," said Fradin. "You used to be able to do it all the time because we had this tremendous influx [of product] and now we don't have that influx and the result is that we're shipping out less."
The extended waiting periods have not only slowed export, but they have made prices unpredictable. "Quotes for vessels are good for 30 days," said Fradin. "If we're quoting prices on any given day to customers, and those prices are good for 30 days but the vessel isn't available for 60 days, the shipping price might go up. If I finish a preparing a product for shipment and go to get the container and can't get it because of the shortage and then am told to wait four weeks, then it's no longer let's say $3,000 to get it to Saudi Arabia, it's $3,600."
"The final freights are calculated at the time of shipment," Fradin continued. "We will issue shipping quotes, but with the understanding that the consumer has to absorb the extra costs. And before the 30-day quotes were good for four or five months, but now you have this shortage the cost of transportation goes up. It's one of the major issues that result in cost increase."
Like many other companies, Rockland has had to adapt to longer waiting periods by booking shipments in advance. "We're no longer waiting for the goods to be prepared," said Fradin. "We're estimating the amount of time it will take for the goods to be prepared. The worst-case scenario is that the four or five weeks come and the goods aren't finished. You just have to roll it over and get the next container."
"The other thing we're doing is communicating to our customers that prices are subject to change – that's inevitable," he continued. "You get accommodation in some markets and others are not as understanding as others. A market like Thailand cannot understand why it's taking so long to get their goods whereas England sees that all the time."
"It's not just something that's affecting Rockland Mills – it's nationwide," said Fradin. "The difficulty is that the U.S. dollar is weak so now you have this opportunity to sell a lot of goods overseas but you're being hindered by the inability to get those goods overseas. The issue has been going on probably for six to eight months, but it's getting worse, not better. There's no light at the end of the tunnel."
The Wall Street Journal reported in April of this year that the shortage of shipping containers in the U.S. can be attributed to several factors, including the "global commodity boom."
The desire for U.S. products abroad has increased the demand for containers among domestic exporters. Simultaneously, the economy shift has caused a decrease in imports, thereby slowing the traffic of containers to the U.S. Simply put, as demand for shipping containers continues to increase in the U.S., their supply decreases.
David Marx, president of Express Air Freight Unlimited, Inc., said that by the end of June his company couldn't get booking for containers until August. "There is a big delay on containers," he said. "The problem is because they don't send as many containers out because they don't have much freight coming in."
"What's happening now is that the low dollar is making exports very attractive to foreigners," Marx continued. "Fuel surcharge on airfreight is getting high and shippers are looking for alternative shipping routes such as the ocean, and now there are surcharges on ocean freight in addition to delayed bookings.''
"We had a million pound shipment going in December and the customer had to wait two months in order for us to get space," he said. "This has become a major problem since the end of last year."
Stan Fradin, president of Rockland Mills, can also attest to this phenomenon. The U.S.-based manufacturer of drapery and blackout linings has had to accommodate waiting periods up to two months long. "Where before we were able to book [a container] that week, we are now having to book six to eight weeks in advance," said Fradin. "You used to be able to do it all the time because we had this tremendous influx [of product] and now we don't have that influx and the result is that we're shipping out less."
The extended waiting periods have not only slowed export, but they have made prices unpredictable. "Quotes for vessels are good for 30 days," said Fradin. "If we're quoting prices on any given day to customers, and those prices are good for 30 days but the vessel isn't available for 60 days, the shipping price might go up. If I finish a preparing a product for shipment and go to get the container and can't get it because of the shortage and then am told to wait four weeks, then it's no longer let's say $3,000 to get it to Saudi Arabia, it's $3,600."
"The final freights are calculated at the time of shipment," Fradin continued. "We will issue shipping quotes, but with the understanding that the consumer has to absorb the extra costs. And before the 30-day quotes were good for four or five months, but now you have this shortage the cost of transportation goes up. It's one of the major issues that result in cost increase."
Like many other companies, Rockland has had to adapt to longer waiting periods by booking shipments in advance. "We're no longer waiting for the goods to be prepared," said Fradin. "We're estimating the amount of time it will take for the goods to be prepared. The worst-case scenario is that the four or five weeks come and the goods aren't finished. You just have to roll it over and get the next container."
"The other thing we're doing is communicating to our customers that prices are subject to change – that's inevitable," he continued. "You get accommodation in some markets and others are not as understanding as others. A market like Thailand cannot understand why it's taking so long to get their goods whereas England sees that all the time."
"It's not just something that's affecting Rockland Mills – it's nationwide," said Fradin. "The difficulty is that the U.S. dollar is weak so now you have this opportunity to sell a lot of goods overseas but you're being hindered by the inability to get those goods overseas. The issue has been going on probably for six to eight months, but it's getting worse, not better. There's no light at the end of the tunnel."
The Wall Street Journal reported in April of this year that the shortage of shipping containers in the U.S. can be attributed to several factors, including the "global commodity boom."
