At the end of 2021, economists misread the decrease in ocean rates as a sign of global supply chain improvement. Unfortunately, they could not have been more wrong. The coronavirus pandemic has continually proven to be a source of uncertainty for the entire world as we navigate the changes to the global economy.
So, what does the future hold, and what can we look to for more insight? While not simple to predict, it may be helpful to examine the flow of trade.
Our team at A American Containers discusses three key indicators of inflationary warning signals that we should all be aware of as 2022 unfolds.
Inflationary Warning Signals
You may have noticed bare shelves and long delays for shipping when you were shopping for the holidays, and unfortunately, there seems to be no end in sight to the shipping crisis.
We should all keep an eye out for the following inflationary warning signals as the new year gains traction:
Ocean and Air Freight Rates
The first indicator to take note of is the ocean and air freight rates. While ocean rates were trending down during the last quarter of 2021, unfortunately, these rates were only down briefly due to the end of the rush of the holiday season. Most shipping contract rates in 2022 are expected to follow 2021’s record highs, and analysts are expecting a peak season for the entirety of 2022.
Prices are set to remain high due to the sustained consumer demand, especially from Asia to the United States.
Ocean shipping rates are up on all the major freight indexes and the shipping community is expecting an increase in demand ahead of the Chinese Lunar New Year which begins on February 1st. It’s important to note that even after the Chinese Lunar New Year, high consumer demand and low inventory will keep shipping rates elevated well into this year.
If shippers look to air freight, they will also be met with a hefty price tag for freight, as air cargo rates from China to the West Coast of the United States increased 25% in December 2021—four times the typical levels.
The biggest factor affecting air rates is that cargo in aircraft passenger cabins will no longer be accepted into China this year, a move that will keep air freight rates skyrocketing.
Learn more about the shipping crisis> Import Boom Side Effect: More Container Ship Accidents
Chinese Shutdowns and Delays
The next inflationary signal is the novel variant of the coronavirus. There has been an increase in Omicron cases in the Chinese manufacturing city of Guangzhou and around the port city of Ningbo. As of the end of December 2021, operations were suspended at several Chinese companies that manufacture items such as pharmaceuticals, batteries, and textiles, due to the Omicron variant.
These shutdowns will only create more delays as consumer demand surges.
Slowdowns at China’s Pearl River
Another indicator of continued shipping congestion is the flow of trade through China’s Pearl River. Last year, as part of China’s pandemic quarantine measures, the Pearl River, a major waterway for inland trade, was slowed down so workers could make it home for the Chinese Lunar New Year quarantine.
As a result, a false increase in shipping containers flooded back into the market after the Lunar New Year of 2021. This is expected to occur again this year and will only add to the chaos of the congestion at the ports and higher fuel rates across the board.
The flow of trade is like a series of pipes. If one gets clogged, it impacts the entire system.
Delays in Vietnam
The last inflationary indicator comes from Vietnam, where the return to work has been much slower than originally forecast. As far as Covid restrictions, the Vietnamese government requires proof of double vaccination for its citizens to travel.
Due to the spread of the Omicron variant, there are reports that workers were waiting to return to work until after Tet, the Vietnamese New Year on February 1st, similarly to the Chinese Lunar New Year.
While this is normal for this time of year in Asia, the delays and congestion will be much more pronounced due to the pandemic, only adding to the pressures on the supply chain. Just like the United States, Vietnam is dealing with epic supply chain challenges.
Vietnam is also being affected by the berth congestion and wait times in the ports of Los Angeles and Long Beach as shipping schedules are completely out of sync. These delays are resulting in many canceled sailings and port omissions (skipping or omitting a port on a ship’s route). With this occurring, many Vietnamese shipping companies are looking to move their goods via alternate routes, causing even more delays.
And the chaos just seems to keep going, as major congestion is occurring at all major border crossings between China and Vietnam, causing the worst cargo backlog in history.
The bottom line? 2022 is going to be another unforgettable year for logistics managers and the global supply chain.
How Does the Shipping Crisis Affect Available Shipping Containers?
While the past two years have created challenges globally, and some shipping container sizes are hard to come by, we still have plenty of 40’ containers ready to be modified and more 20’ foot containers on the way!
If you need a ground-level office, a safe place to store landscaping equipment, or something a little unique to suit your needs, our team at A American can get it done! How can we help you think outside the box®?
Ready for a quote? Call us today at (813) 740-1911!
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