Want it for Christmas? Order it now
COVID-19 has quashed last-minute shopping
TORONTO — Just 115 days until Christmas …
OK, that might sound like a lot, but if we have learned one thing from COVID-19 it’s to be prepared for the unexpected.
This holiday season could be a major retail event, with consumers itching to spend that whack of cash they have accumulated during the pandemic.
But what if there is a problem with supply?
Supply chain headaches have plagued the COVID-19 recovery, and according to BofA Global Research they are not getting any better.
BofA analysts meet recently with Chris Chase, marketing manager for the Port of Los Angeles, for an update on the current backlog at the ports, and gleaned some interesting insights into transport problems during COVID-19.
According to BofA’s own transport tracker, fluidity at the LA port and the Port of Long Beach deteriorated significantly during August. Together these two ports constitute the largest in North America, moving a third of all boxes that come in and out of the United States.
Back in June it looked like the ports had turned the congestion corner with only 10-12 ships at anchor, but after the July 4 holiday the bottleneck took a turn for the worse.
The number of ships waiting in the Bay has climbed to 35 vessels, with an average wait time of a week before they can dock.
Chase told BofA that unlike past backlogs which could be attributed to a single cause, this one was brought on by a long list of problems, ranging from lack of equipment to move the goods such as boxes, railway cars and trucks, to labour shortages and a lack of warehouses to store the goods once they are onshore.
One particularly stark example is railway transport. Once goods are off the ship many of them are shipped to Chicago, the biggest rail destination, accounting for 50 per cent of rail traffic from the Los Angeles and Long Bay ports.
But currently the Chicago yards cannot turn the freight fast enough to get the containers moving. In 2019, it took just 50-60 hours to get a box off a ship and onto to a train. Now it is taking 14 days.
The top goods moving through the ports are furniture, auto parts, apparel and footwear. Chase told BofA that any cargo currently on the water or expected to load in the next few weeks should arrive in time for the holidays.
However, for retailers ordering in late September and shipping in November there is a “sizeable risk” the product will not arrive in time. Normally it would take six weeks from purchase order to receiving the goods in the U.S.; it’s currently taking 9-10 weeks because of the global supply chain headwinds, said Chase.
And prepare for higher prices. Because of congestion, shipping rates are hitting record highs. Rates from Asia to LA have shot up from $2,500 a box a year ago to $20,000 a box.
Capital Economics also sees bottlenecks at ports, delivery delays and sky-high shipping costs enduring into 2022.
Simon MacAdam, Capital’s senior global economist, said new waves of the Delta variant in Asian countries are adding to shipping bottlenecks and it could be weeks or months before that is brought under control. “And with shortages of truckers and warehouse staff reportedly afflicting countries around the globe, demand seems likely to press up against shipping capacity constraints into next year,” he wrote.
On the demand side, Chase told BofA that strong consumer demand, along with low inventories, will keep the pressure up into 2022, as companies “can’t replenish shelves fast enough.”