Thread by @EytanBuchman

The Suez Canal was just the tip of the iceberg. Since 40% of sewing thread is made in China...

a 🧵 on the whys and how global supply chain crisis impact YOU seems appropriate.

Some context.

Freight is big. $19 trillion dollars of goods are exported annually. An estimated 90% (by volume) ships in those huge container ships. A third of all trade by value goes by air.

And lockdown means less spending on services and more spending on goods. Way more. The @wto data on global merchandise exports in Q1 2021 were 5% higher than they record set in 2018.

Everything comes from somewhere. The 📱 you're reading this on, the 🚽paper you stockpiled, your crunchy granola.

But global supply chains are being stretched like never before. And they keep getting hit by more unexpected crises.

Before I get into what it means for non-freight-folks, here's how much it costs to ship a 40' container from China to the United States:

August 2019: $1,326

August 2020: $3,224

August 2021: $18,425 💸
(Data via @freightos)

So if you have a container of couches, it's not unreasonable to expect every single one to go up by close to $1,000.

So why are freight prices rising faster than Dogecoin after an @elonmusk tweet?

Lots of reasons. Roving COVID port shutdowns, people buying stuff instead of services, the Ever Given/Suez Canal fallout, passenger flight cancellations and all the right containers in all the wrong places turned global freight into a shipstorm. I'll dive into each soon.

But let's get personal first. It hit me at home with my couch (see message from my wife a few months ago). Keep reading to see what it means to you.

It's going to take longer to get stuff.

The couch that I ordered is going to take six months. And that's decent.

Average ocean freight door-to-door shipping has gone from 41 days to 70 days year over year. And that's only once goods are loaded.

(Again, data via @freightos)

Think Uber surge pricing is bad? Ocean liners are now charging surcharges of $6,000+ dollars on top of freight prices to just secure space on a ship.

You don't need to be an economist to know that that means higher price tags too. Timber is up 55% vs August ‘19 (h/t @MktsInsider).

Businesses of all types get hit. 80% of ecommerce sellers are suffering from global supply chain issues; 46% were increasing prices to compensate... when rates were less than half of what they are now.

To summarize - things are taking longer to get there, they cost more, there are inventory shortages which means your holiday shopping is gonna get hit...and it may even drive brief inflation
oecdecoscope.blog/2021/06/19/how… @OECD

It's going to get worse.

August is when ocean freight usually STARTS to get hot in preparation for holiday season. With a brief January intermission, it extends until post-Chinese New Year (happy Year of the 🐅 btw)

Also, there are under 2K ships that can carry over 5,000 containers (h/t @MarineTraffic). In Feb. 2020, ~9% of ships weren’t in use (h/T JOC) . Right now, it's practically 0%. If this was on land, you'd be borrowing your uncle's pick up truck at this point.

Air cargo’s not much better. Remember airplanes? 50%+ of air cargo normally flies on passenger planes. When those planes stopped flying, cargo got more expensive. Like, 400% more expensive in just a few months.

Vaccinations may mean slightly more passenger travel but it's still not back (see @IATA data on available cargo tonne kilometers)

Air cargo was somewhat addressable. Airlines converted passenger planes into cargo planes or flew flights with empty upper decks. Here's one example from @_austrian.

Air cargo prices have since dropped, but not so much. Cause we keep on buying s**t (myself included). Air cargo prices are up close to 3x from the beginning of the year.

People make cargo tick. So outbreaks at ports or airports means cargo slowdowns. A few weeks ago, Ningbo, the third largest container port, partially shut down, causing a 50 ship line-up. Two weeks later, an airport in Shanghai got hit too.

The Ever Given running aground in the Suez Canal didn't help. But getting it back afloat doesn't save the day. A one week backlog means ships all arriving at port together, waiting time to unload, and then creating a cascading delay on their return to Asia for more stuff.

Then a typhoon hit in July that caused slowdowns, together with A July Vietnam outbreak that prevented factories from clearing port container yards or removing finished goods, which meant manufacturing slow-downs.

When it gets bad, double-digit ships could be waiting to unload airports like @portoflongbeach . They’re doing an amazing time but it can still look like this (h/t @MarineTraffic)

Misplaced empty container stockpiles meant that even when there was space on ships, there wasn't necessarily equipment. This is still an issue. Maersk, the world's largest ocean liner, just explicitly called on companies to return containers faster.

So yea, it's not the stores' fault that your patio furniture might not make it until Christmas and that your Christmas lights might only make next year.

Some companies have been good at digging themselves out. Home Depot shelled out for their own chartered container ship. When Peleton wanted their bikes quick, they flew them. Smaller companies have shifted sourcing. But everyone's getting hit.

And, of course, this doesn't take into account the other epic shipstorms that have hit importers over the past few years, like 25% tariffs slammed on in 2018 and 2019 and last mile delivery getting killed during 2020.
wired.com/story/amazon-e…

To sum up, it's gonna be a tricky few months, you're going to wait much longer for things, and a large chunk of inventory may not not be around.  Not much you can do (besides slowing down on the "Buy it now" clicking). 

So what can you do?

First, go give a nod to the folks who cover this when things aren't as dramatic. It's important. People like @cmroberson06 @LogTechEric @SoumayaKeynes @PaulPage @rrpre @WSJLogistics @jensmithWSJ @b_muzz @sc_hot_tub and others.

Then go hug (socially distancing, of course!) folks who have made logistics happen despite all this. The fact that you've only been marginally impacted is a miracle that is completely delivered by them.

Great to see the logistics ❤️. @freightos is the largest global booking platform, helping importers\exporters instantly price and compare providers, then manage shipments. Our @WebCargoSL platform connects forwarders and air/ocean carriers with live pricing, capacity and booking.