Rising Cost of Ocean Freight Affect Karat Products
Never has the global supply chain experienced such overwhelming demand nor exponential cost increases that it has this past year – these past few months to be more precise. Companies that source goods from Asia are in a bidding war1 for containers, which are in short supply, causing prices to skyrocket. In late March the ocean freight cost from Asia to California was $5,000 then a month later it jumped to $7,000. Now, in July, that cost has more than doubled to $15,000. Additionally, a container shipping from Asia to New Jersey was $13,000 in late April and is now up 54% to $20,000.
Out of desperation, shippers have been willing to pay to over 250% more than they did last year just to meet demand. Those that have low-value goods face freight costs higher than they’re worth and are forced to pass costs onto customers or to leave them out of stock. Karat® by LollicupTM has regretfully issued several price increase announcements this year, with the latest one taking effect late July, in order to maintain inventory for its customers so that they can continue to run their businesses.
The biggest impact to costs and delays are at the ports. Southern California ports, the busiest ports in the nation, are backed up due to lack of manpower and limited capacity. Container volume at the port of Los Angeles grew over 80%2 and pushed them beyond their limits. As a result of this bottleneck, cargo ships are left waiting in the harbor for days and sometimes weeks to unload. A record number of shipments were reported more than a week late because of this congestion.
On the other side of the globe, China’s shipments created a backlog last month when the China shut down operations in Guangdong to mitigate a COVID outbreak3. Within Guangdong are the world’s busiest container ports, including Yantian which processes 36,000 containers every day. Consequently, the shut down left thousands of containers sitting and waiting at the dock. Once operations resumed, there was still an issue of labor as the coronavirus spread among workers.
The ripple effect of the pandemic across the global supply chain continues to compound and with the heavy holiday shopping season right around the corner, there seems to be no end in sight. Experts believe costs will continue to rise through early 2022. Karat by Lollicup may have no choice but to raise prices in the future, but customers will always be well informed of any changes as we value transparency.
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1Page, Paul (2021, July 5) Container Shipping Prices Skyrocket as Rush to Move Goods Picks Up. The Wall Street Journal. https://www.wsj.com/articles/container-ship-prices-skyrocket-as-rush-to-move-goods-picks-up-11625482800
2Nakayama, Shuji & Shiraiwa, Hiona (2021, April 4) Freight rates spike as Asian cargo ships jam US West Coast ports. Nikkei Asia. https://asia.nikkei.com/Business/Transportation/Freight-rates-spike-as-Asian-cargo-ships-jam-US-West-Coast-ports
3He, Laura (2021 June 18) A huge backlog at China’s ports could spoil your holiday shopping this year. CNN Business. https://www.cnn.com/2021/06/17/business/china-ports-global-supply-chain-intl-hnk/index.html