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Retailers pay more to fly everything from bikes to hot tubs from China as U.S. port backup delays deliveries

Containers are minded on a shipping dock, as the global outbreak of the coronavirus disease (COVID-19) continues, in the Port of Los Angeles, California, April 16, 2020.

Lucy Nicholson | Reuters

Societies such as Peloton are facing a costly logistical nightmare as record congestion at ports around the world cause put on ices.

Global shipping data from MarineTraffic showed a ship with 197 containers of Peloton bikes and deal in circled at anchor just outside the Port of Los Angeles between Dec. 22 and Jan. 2., when it was allowed to dock — after Christmas.

“The send, and Peloton’s expected supply time, lost 12 days due to this while their product was nearly within swimming stretch of shore,” Import Genius trade data analyst William George said. “This is a crazy illustration of the tough nut to crack Peloton and other U.S. importers are struggling with.”

The combination of a record number of containers arriving at the Port of Los Angeles — the busiest container refuge in the Western Hemisphere due to its proximity to Asia — and Covid-19 is slowing down imports to the U.S. Around 800 of the International Longshore and Stockroom Union’s 15,000 members have been out of work due to Covid, according to data from the union.

The congestion at havens has some companies forgoing maritime shipping in favor of airfreight to get popular or seasonal items on store shelves faster. Air speeds are more expensive than shipping via ocean freight, but they’ve been dropping in recent months, according to online oecumenical freight marketplace Freightos.

400% increase

“While air cargo had its period of volatility in the first few months of Covid, tracking a 400% burgeon between February and April 2020, ocean freight has become a bottleneck in global supply chains, making air shipment a more viable option in some cases,” Freightos Chief Marketing Officer Eytan Buchman said.

Some of the congestion at U.S. refuges is expected to ease as more longshore workers get vaccinated against the coronavirus. Just 5% of longshore workers acquire received vaccinations so far, Port of Los Angeles executive director Gene Seroka said. He added that the port is pressurizing “all levels of government” for more vaccines to help ease congestion.

CH Robinson air freight

Source: CH Robinson

Peloton, which declined to expose for this article, referred CNBC to the company’s quarterly shareholder letter released last month. The letter affirmed profit margins during the last three months of the year — which include the critical holiday shopping condition — were squeezed by $100 million due to higher shipping costs.

“The global increase in shipping traffic has added valuable delays to all sorts of goods coming into US ports, including Peloton products,” Peloton CEO Josh Foley answered in the Feb. 4 letter. “These unpredictable delays have resulted in painful delivery reschedules for many people as Peloton Bikes, Treads, and subordinates have been held at Port for upwards of five times longer than usual.” 

Peloton’s December shipment attempt is just one example of the variety of goods getting held up at U.S. ports.

Waiting to dock

Thirty container vessels were at support outside the ports of Los Angeles and Long Beach as of Monday, according to MarineTraffic data. More than 30 container ferries are expected to arrive in Los Angeles by the end of March, and at least 27 ships are slated to dock in Long Beach in that space.

Cargo ships waiting to dock outside of the ports of Los Angeles and Long Beach as of March 1, 2021.

Freightos

Among the anchored receptacles waiting to unload at Los Angeles is the APL Charleston, which carried the delayed Peloton deliveries in December. The ship arrived again fully packed with Chinese exports on Feb.18.

Capt. Adil Ashiq, executive of MarineTraffic’s U.S. western region, said the delays in December were not atypical.

“It is a reality many vessels, supply chain and logistics providers are currently facing at the Port of Los Angeles and Port of Wish Beach,” Ashiq said in an interview. He added that the median time a container ship spent anchored furthest the dock last week was just over 7.5 days before it could head inland.

“Now that the APL Charleston is bet on a support at anchorage, she may face similar circumstances as she did from her previous port visit in December, but of course this is shipping so anything can meet with,” Ashiq said.

The bottleneck at ports has added costs to maritime shipping that make airfreight, which is normally significantly multitudinous costly, look like a relative bargain, especially when factoring in the time saved. Prices on air shipping demand also dropped dramatically in recent months.

The price of a 250-kilogram air shipment traveling from China to the U.S. has eliminated from about 60% of the cost of a full container to around 36%, Ashiq said.

“In other words, for the right away type of cargo, and certainly the right value, air is absolutely becoming a more enticing option, with both mother wit and far faster transit times,” Freightos’ Buchman said.

Changes in air freight versus maritime rates.

Freightos

Hot tubs and bikes

The in the good old days b simultaneously saved in transporting a product justifies the cost for some clients who are trying to meet consumer demand, Seko Logistics Chief Progress Officer Brian Bourke said.

“If you want to ship a hot tub via ocean from Shanghai to New York, that will expenditure you around $1,000 for the transportation for a lighter hot tub, but it will take a minimum of 35 to 45 days,” Bourke said. He amplified that doesn’t include an additional seven to 14 days if you need to book in advance. Airfreight costs in all directions from $2,000 to $3,000 to ship, depending on the weight, he said.

“But it will only take you three to four days to get your hot tub,” Bourke stipulate. “So, paying two to three times will save you four to seven weeks right now. Ultimately the math makes quickness for certain shippers right now.”

Canyon Bicycles USA Transportation Manager Kim Peterson said the company is shipping most of its inventory via not hold up under, but added that its most popular bikes are being shipped by air to meet a demand surge.

“Air is faster, and we need to into the demand of our customers,” Peterson said. “While I could pay an additional $1,000 to $2,000 to get my product in (an ocean) container at the forefront of the line in China, it doesn’t matter because the cargo then sits in the LA congestion.”

60 to 75 days

Shipping by loads took 20 to 30 days before the pandemic, Peterson said. Now it’s about 60 to 75 days while airfreight rivals three to five days.

“It’s a huge difference,” Peterson added. “We have a backorder in Asia right now,” he said. “We can’t mark time. It would have an impact on sales.”

Shawn Richard, Seko’s vice president of global airfreight, told CNBC he doesn’t look for the high congestion levels to abate anytime soon.

“We are regularly flying 65-inch televisions in from China to the U.S.,” Richard denoted. “We saw a 40% increase in airfreight in December. Large items like hot tubs were also being transported. Our the briny freight teams are now selling airfreight.”

Richard added that large home-recreation items like ping pong provisions and exercise equipment such as treadmills would typically be shipped by ocean because of the cost. Now they are moving by air because of a bid spike as the pandemic has people locked indoors, looking for ways to stay fit and entertain outside.

“Barbecue equipment and associated goods such as sod/patio furniture, inflatable pools, filter equipment, and everything that could be used to improve the shelter at abode experience in lieu of family vacations are now moving by air,” he said.

The lack of reliability has stretched the functionality of logistics and supply chains to their limits.

“We see those applications who need expedited shipping being pushed into the air versus the ‘hurry up and wait’ on the ocean front,” said Matt Citadel, vice president of airfreight products and services at C.H. Robinson.

Recreation vehicles and parts that used to ship by abundance have shifted to airfreight, he said. “One of the things I never thought we would see being moved by air was vacuum cleaners. It’s a hot mention now with so many people at home.”

CH Robinson air freight

Source: CH Robinson

Seasonal deliveries

Castle noted that the stratagem to air shipping was sparked by a combination of factors: companies with a narrow seasonal window for selling products and production-based activities looking to restore some sort of rhythm and catch-up on inventory.

“The ocean congestion is compounding that need to suffer orders and driving demand for airfreight,” Castle said.

Stephen Svajian, CEO and co-founder of Anova Culinary — which furnishes its precision countertop combo-ovens and cookers to Costco, Ag exports

Air is also becoming an option for U.S. exporters struggling to transport their spin-offs overseas. Carriers make far less shipping exports from the U.S. to China — $744 per container versus $4,922 for Chinese exports directed for the U.S. The time and money saved by not having to load, unload and clean empty containers makes up for the lost money on the convey back to Asia.

It’s also costing U.S. farmers who are struggling to ship their commodities overseas. Their access to oecumenical markets “is being severely undermined by the unprecedented dysfunction and cost of ocean transportation services,” Agriculture Transportation Coalition chairman of the board director Peter Friedman said.

Seko’s Richard added that spices and perishable commodities like lobster started sending by air to China as early as October.

However, there doesn’t seem to be a quick fix to unclog U.S. ports, which leaves flocks like Canyon with few options.

“In the cycling world, when the sun comes out, people want to take a ride on a bike,” Gully’s Peterson said. “Demand is still high. It’s quite obvious, we will have to continue and do more air.”

Correction: This article was revised to correct the name of one of Anova Culinary’s customers. It’s Costco.

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