Manufacturing/Shipping Folks, What Are You Seeing?

[Fryowa]

Any of you guys doing any importing, what are you seeing for TEU and FEU container prices to your door from China? I work for a mid-size OEM in Iowa; we typically bring in 4-5 containers a month from Ningbo to Seattle. I'd say 90% of the time (in a normal environment) they go rail to Omaha, and trucked to our door.

8 months ago we were paying $4,500-$5,500 per FEU, and that was stable for about 3-4 years prior. We just got quotes at $25,870 and no signs of slowing down. And that's if we can get containers spoken for. Our lead times were pretty standard at 8 weeks from POs being placed, now we're looking at 4-6 months with no rate guaranteed. Absolutely fucking wild and I have no idea when this thing is going to snap. The US rail system is completely clogged (Chicago terminals sent letters to shippers that they are going to be closing the door to new arrivals for 7 days to clear out backlogs which does nothing to solve the problem), and with Christmas season approaching this is the busiest time of year because everyone needs their TVs and shoes and fake purses sent over on the boat from China.

And don't even get me started on steel prices.

 

[HawkGold]

A few weeks ago I was at the Port of LA and there were a lot of container ships backed up towards Catalina like I've never seen before. Bike shops can't get parts as Amazon orders get priority over businesses due to markups.

 

[okeefe4prez]

We do a ton of work for a logistics company. It is a disaster out there. Absolute disaster. Railyards are a cluster. The ports are backed up all over the place.

If the longshoremen union on the West Coast was smart, they'd call a strike today and demand a doubling of wages and for the consolidation and deconsolidation bros to get included. No one will work the rail yards or the consolidation and deconsolidation jobs. Those labor shortages have slowed down the flow everywhere, and as throughput picked back up, operations are backing up more and more everyday because there is more going in than they can turn around every single day. There's a nonzero chance that in 3 months, the 4-6 months quote will turn into 8-9 months.

 

[Fryowa]

We do a ton of work for a logistics company. It is a disaster out there. Absolute disaster. Railyards are a cluster. The ports are backed up all over the place.

If the longshoremen union on the West Coast was smart, they'd call a strike today and demand a doubling of wages and for the consolidation and deconsolidation bros to get included. No one will work the rail yards or the consolidation and deconsolidation jobs. Those labor shortages have slowed down the flow everywhere, and as throughput picked back up, operations are backing up more and more everyday because there is more going in than they can turn around every single day. There's a nonzero chance that in 3 months, the 4-6 months quote will turn into 8-9 months.

We're lucky that we have a Chinese national liaison who a couple years ago became a permanent employee. He has an office and a house over here in the States and basically flies between China and South Dakota (no income tax).

He's always able to "find a guy" when we need it. It's basically legal extorsion. We'll get an email that says, "Hey, containers are backed up, freight is going to be $18,000 on this next container but I have no idea when it will ship. But I found a guy who can get a couple containers next month, but it will be $22,500." There's always the obligatory, "if you act now."

In fairness to our guy, he's not the one doing the extorsion. It's the gangster freight brokers in Ningbo yanking all the strings. It's happening Stateside too. We have a container sitting in Omaha right now getting charged fines of $200 a day because it hasn't been picked up yet, but we can't pick the fucking thing up because it's buried behind a quarter mile of other containers. When we found out about the fine we hired a local trucking company to go get it and the people holding it hostage said, "You can't pick it up. There's no way to access it right now." But they're still charging us the fine. Whatdya do? We need it to make product so we'll have to pay the company to get it out of hock.

 

[HawkeyeDug]

I heard that we can't get shipping containers stateside because they are making more money shipping them back across the Pacific empty than sending them out this way to get filled back up. I'm sure this is fairly common knowledge for you all.

 

[Fryowa]

I heard that we can't get shipping containers stateside because they are making more money shipping them back across the Pacific empty than sending them out this way to get filled back up. I'm sure this is fairly common knowledge for you all.

Typically about half of all containers going back are empty. That's up to about 75% now. Couple reasons for that.

The first and most applicable to the situation going on now, is that containers have a set amount of time that they'll sit in a US port. In a normal world that's typically 3 days. Now that things are bonkers, it's around 7 hours. Essentially all containers that go back to Asia full--are full of grain. It's really, really tough to get a container out of port, loaded with soybeans and back on the ship in 7 hours. Shippers make more money getting that container back to China in a hurry because of demand.

Second reason is that Asian countries are moving more and more towards bulk container shipments of grain. It's a whole lot cheaper and more efficient to load an entire ship full of bulk soybeans than it is to fill containers.

The third and a little less significant reason is a chicken/egg problem. As shipping becomes more expensive through this, it's less attractive to import as much grain to Asia, which in turn lessens demand. There are supply and domestic transport issues on both sides of the pond, but that's mostly immaterial to container demand itself.

So even in a normal world, container usage is pretty much a one way deal, but now, it's even more so. It's not like domestic trucking or rail where there's always some sort of goods to move around so you rarely see any rail car or semi trailer empty just because there's nothing much going back over there besides crops.

 

[Northside Hawk]

I see a lot of delivery dots on a map every morning as I try to plot routes for eleven drivers including myself.

Then I see a truck full of packages at the beginning of the day and a truck empty of them at the end of the day.

At least I don't deal with the freight counts when they came in the night before. Headaches you don't need just before bedtime, and they're seldom accurate anyway.

 

[Fryowa]

I see a lot of delivery dots on a map every morning as I try to plot routes for eleven drivers including myself.

Then I see a truck full of packages at the beginning of the day and a truck empty of them at the end of the day.

At least I don't deal with the freight counts when they came in the night before. Headaches you don't need just before bedtime, and they're seldom accurate anyway.

Are you FE or UPS?

The guy who handles our FedEx LTL route where I work said he has zero clue how he’s going to handle Christmas this year.

 

[Fryowa]

We do a ton of work for a logistics company. It is a disaster out there. Absolute disaster. Railyards are a cluster. The ports are backed up all over the place.

If the longshoremen union on the West Coast was smart, they'd call a strike today and demand a doubling of wages and for the consolidation and deconsolidation bros to get included. No one will work the rail yards or the consolidation and deconsolidation jobs. Those labor shortages have slowed down the flow everywhere, and as throughput picked back up, operations are backing up more and more everyday because there is more going in than they can turn around every single day. There's a nonzero chance that in 3 months, the 4-6 months quote will turn into 8-9 months.

Just got our weekly update on pending shipments….

We have 7 scheduled to hit the water in August. The one next week is confirmed and apparently already loaded up. Three are cancelled with no ETS and the other three are “not likely.”

“This was the first time I’ve heard our broker use the words “black market” in serious convo. He said black market containers (which is basically just extortion) would be north of $30,000.

I asked the details of how it worked and apparently there are 2 ways. 1) Some of the Chinese freight forwarders started buying up space on ships when this thing got wild and they’re betting on American companies to pay the ransom, or 2) the brokers have a guy(s) running the load outs who will overload a ship by 10-20 containers over max and look the other way. Option 2 is less common because it relies on being able to physically get a container which is tough.

This isn’t sustainable for much longer. Speaking for my company as well as some other places in our area, we are going to have to start prioritizing shipments and pushing out customer orders, which is bad juju. Playing catch-up in manufacturing is a lose/lose proposition. This thing is going to crack nationally in a hurry and when it does, watch out 401k’s.

 

[okeefe4prez]

This isn’t sustainable for much longer. Speaking for my company as well as some other places in our area, we are going to have to start prioritizing shipments and pushing out customer orders, which is bad juju. Playing catch-up in manufacturing is a lose/lose proposition. This thing is going to crack nationally in a hurry and when it does, and watch out 401k’s.

I saw a force majeure notice on this back in Feb 2020. My quote on the wasteland was "The reverberations through the supply chain are going to be fucking epic." We're now there. Have you driven by a car dealership? Holy shit. The Ford dealer here has like 8 trucks left on the lot. They normally have way over 100. The Chevy dealer is even worse. You go into Home Depot or Wal Mart and while last March and April they had no toilet paper or cleaning supplies, they now have widespread generalized shortages. It is a bit unsettling.

The market is just being held up by Fed money printing right now. If Ford has no inventory (a story that is common with a lot of manufacturing outfits) they will eventually have to furlough. They won't buy the fancy IT equipment of the companies trading at 1000x earnings because of their meteoric growth. You'll see another recession. You can keep printing money, but at the end of the day that doesn't change the fundamental massive supply side shock.

 

[Fryowa]

I saw a force majeure notice on this back in Feb 2020. My quote on the wasteland was "The reverberations through the supply chain are going to be fucking epic." We're now there. Have you driven by a car dealership? Holy shit. The Ford dealer here has like 8 trucks left on the lot. They normally have way over 100. The Chevy dealer is even worse. You go into Home Depot or Wal Mart and while last March and April they had no toilet paper or cleaning supplies, they now have widespread generalized shortages. It is a bit unsettling.

The market is just being held up by Fed money printing right now. If Ford has no inventory (a story that is common with a lot of manufacturing outfits) they will eventually have to furlough. They won't buy the fancy IT equipment of the companies trading at 1000x earnings because of their meteoric growth. You'll see another recession. You can keep printing money, but at the end of the day that doesn't change the fundamental massive supply side shock.

I bought a new vehicle in April of '20 with a $4K rebate and 0.9% financing. Car lots were absolutely bursting at the seams back then and I won the fucking lottery by purchasing at that time. Which is good not only because it was a good deal, but also because I don't know if in 5 years it will yet be a good time to trade. This thing is gonna last a while.

Friend of mine in the powerline industry works for Par (union contractor nationwide). He said corporate has ordered 450 F-250s over the past 16 months, plain Jane and nothing fancy work trucks, and they've had 20 delivered as of last week. There are hundreds of thousands of vehicles sitting on the front lawn waiting for computer chips.

The real, REAL bad part of this for our economy is that lower tier, low value-add raw materials like lumber, etc. are starting to trend down in the futures markets if you look at them, which makes sense as people get scared. But dumbasses are building houses at these ridiculous prices because banks can't give money away fast enough.

Brody and Mackayla who are 2 years out of college and working high paying jobs in the service industry (first ones to get laid off) just got a $500K mortgage to build a house that'll be worth $325K in a couple years. Along with notes on 2 jet skis, a camper, a Harley, annual trips to Cosat Rica for Instagram pics, and twins on the way....those idiots are completely fucked and they're gonna take the rest of us down with them.

 

[okeefe4prez]

I bought a new vehicle in April of '20 with a $4K rebate and 0.9% financing. Car lots were absolutely bursting at the seams back then and I won the fucking lottery by purchasing at that time. Which is good not only because it was a good deal, but also because I don't know if in 5 years it will yet be a good time to trade. This thing is gonna last a while.

Friend of mine in the powerline industry works for Par (union contractor nationwide). He said corporate has ordered 450 F-250s over the past 16 months, plain Jane and nothing fancy work trucks, and they've had 20 delivered as of last week. There are hundreds of thousands of vehicles sitting on the front lawn waiting for computer chips.

The real, REAL bad part of this for our economy is that lower tier, low value-add raw materials like lumber, etc. are starting to trend down in the futures markets if you look at them, which makes sense as people get scared. But dumbasses are building houses at these ridiculous prices because banks can't give money away fast enough.

Brody and Mackayla who are 2 years out of college and working high paying jobs in the service industry (first ones to get laid off) just got a $500K mortgage to build a house that'll be worth $325K in a couple years. Along with notes on 2 jet skis, a camper, a Harley, annual trips to Cosat Rica for Instagram pics, and twins on the way....those idiots are completely fucked and they're gonna take the rest of us down with them.

The houses down here all have two ACs and two furnaces. My buddy is under contract on a new build. It looks good, all is going well. They called and said "good news and bad news, good news is construction will be complete by Thanksgiving just like we said, bad news is we can't get furnaces or ACs until God knows when... and oh by the way I hope you weren't too in love with the appliances you picked because the fridge and stove are gonna be different." Of course they are offering to terminate, but the price is probably up $100k since he signed the contract so that's a non-starter. This dude is considering moving the HVAC systems out of his existing house (built 2010) into the new house just to get the certificate of occupancy to be able to close and move in.

Have another buddy who just two weeks ago got a new F-150 work truck. He works for a city government and they bought it in December with extra money they had to spend before the end of the fiscal year. The dealer delivered it July 15. Took almost 8 months. Said they want to order more this year, but the dealer will not give a firm commitment on delivery.

 

[Fryowa]

The houses down here all have two ACs and two furnaces. My buddy is under contract on a new build. It looks good, all is going well. They called and said "good news and bad news, good news is construction will be complete by Thanksgiving just like we said, bad news is we can't get furnaces or ACs until God knows when... and oh by the way I hope you weren't too in love with the appliances you picked because the fridge and stove are gonna be different." Of course they are offering to terminate, but the price is probably up $100k since he signed the contract so that's a non-starter. This dude is considering moving the HVAC systems out of his existing house (built 2010) into the new house just to get the certificate of occupancy to be able to close and move in.

Jesus. Can't get a certificate without HVAC? I'd want to be moved in and offload the other house furnace or not. As long as you don't get freezing temps.

 

[Northside Hawk]

Are you FE or UPS?

The guy who handles our FedEx LTL route where I work said he has zero clue how he’s going to handle Christmas this year.

FedEx.

We have finally slowed down to normal volume for the first time time since pre Covid. Shopping habits changed and I knew many would stay with new habits even as mask mandates relaxed and people returned to workplaces.

Holiday peak, which basically didn't end this year until June, will be ramping up soon enough. We survive by hiring extra drivers, extra package handlers, blacking out time off from mid November on up, and laying down the gauntlet not to mess with this policy. Or you will answer to several angry drivers who had to race daylight to deal with the mess you created.

What messed up the first half of this year was trailers were backed up at shipping hubs all over the country for weeks, then the bad Texas weather in February, and all the while you don't have the manpower you would have in early December. Covid created an unprecedented situation for us, as it did for many, and it was a lot of learning on the fly through trial and error.

 

[Fryowa]

Update...

Just got off our weekly call re: China shipments. We've seen and heard rumblings of this but it's finally affecting us...

The way full container loads usually travel inland (we never share with other entities, our containers are always 100% our stuff) is they hit the port, get loaded onto rail cars, hit the nearest large depot (for us it's Omaha), and they finish the short remaining trip via truck. The container gets dropped off the flatbed in our freight yard and we unload it, and the container heads back to port.

But now, with containers obviously being in such high demand, shipping companies like Maersk, Evergreen, One, etc., aren't allowing their containers to be loaded onto rail. They are requiring that at the port the containers be emptied, contents loaded onto van trucks, and the containers put immediately back on the ships for the trip back to China. They don't want the containers spending a week in Iowa or Florida, or New Mexico before they have them back in their possession.

This is called transloading, and it fucking sucks. It takes longer and is ridiculously more expensive. What actually happens is your goods get off-loaded into those van trucks, taken back to a warehouse somewhere where you schedule a truck shipment, then they get loaded onto that semi and trucked all the way here. There's a shit ton of labor and administrative cost involved in loading and unloading 40' of cargo twice, and we all know who pays for it.

From what I'm hearing through the massive grapevine, unless your name is Walmart or Amazon or Home Depot, all major shippers are going to require transloading from here on and prohibit rail service using their containers. If you guys thought it was hard to find a truck to haul your shit right now, just you wait. This is bonkers. And it's going to get worse.

 

[MelroseHawkins]

We do a ton of work for a logistics company. It is a disaster out there. Absolute disaster. Railyards are a cluster. The ports are backed up all over the place.

If the longshoremen union on the West Coast was smart, they'd call a strike today and demand a doubling of wages and for the consolidation and deconsolidation bros to get included. No one will work the rail yards or the consolidation and deconsolidation jobs. Those labor shortages have slowed down the flow everywhere, and as throughput picked back up, operations are backing up more and more everyday because there is more going in than they can turn around every single day. There's a nonzero chance that in 3 months, the 4-6 months quote will turn into 8-9 months.

I was dumbfounded the other night last week. I don't do a lot of shopping but I needed some necessities such as simple 4 X 4 guaze for a burn I'm treating and some shampoo I like. I went into Target in Cedar Rapids and couldn't believe how empty the shelves were, especially for what I was seeking. I mean there weren't any gauze the size I needed and my great Harry's Shampoo/Conditioner was entirely empty. The shelves where freaking empty half the aisle. I was like, WTF!

Guy at work explained sometimes its not the product that is delayed in manufacturing, it's a problem with the shipping containers either sitting full or sitting empty. The logistics of moving the product is all f'ed up.

 

[MelroseHawkins]

I saw a force majeure notice on this back in Feb 2020. My quote on the wasteland was "The reverberations through the supply chain are going to be fucking epic." We're now there. Have you driven by a car dealership? Holy shit. The Ford dealer here has like 8 trucks left on the lot. They normally have way over 100. The Chevy dealer is even worse. You go into Home Depot or Wal Mart and while last March and April they had no toilet paper or cleaning supplies, they now have widespread generalized shortages. It is a bit unsettling.

The market is just being held up by Fed money printing right now. If Ford has no inventory (a story that is common with a lot of manufacturing outfits) they will eventually have to furlough. They won't buy the fancy IT equipment of the companies trading at 1000x earnings because of their meteoric growth. You'll see another recession. You can keep printing money, but at the end of the day that doesn't change the fundamental massive supply side shock.

Printing money is never a good thing and a horrible forcast of what is coming. It just lessens the value of the dollar. I don't know how this is all going to end.

 

[okeefe4prez]

I was dumbfounded the other night last week. I don't do a lot of shopping but I needed some necessities such as simple 4 X 4 guaze for a burn I'm treating and some shampoo I like. I went into Target in Cedar Rapids and couldn't believe how empty the shelves were, especially for what I was seeking. I mean there weren't any gauze the size I needed and my great Harry's Shampoo/Conditioner were entirely empty. The shelves where freaking empty half the aisle. I was like, WTF!

Guy at work explained sometimes its not the product that is delayed in manufacturing, it's a problem with the shipping containers either sitting full or sitting empty. The logistics of moving the product is all f'ed up.

Read Fry's stuff up above. Dude knows what's up. Another issue with the supply chain is that the commodity or product you want to buy may itself be in abundant supply, but the plastic pellets that make the bottle that your shampoo comes in could be stuck in Texas when they need to get to somewhere else to make the bottle. Without the bottle, you got no shampoo. Or it could be something stupid like the ink necessary to mark the bottle or the glue that goes on the back label with the UPC code or something. The stories I am hearing from dudes in manufacturing are crazy. It's eerie.

 

[MelroseHawkins]

Update...

Just got off our weekly call re: China shipments. We've seen and heard rumblings of this but it's finally affecting us...

The way full container loads usually travel inland (we never share with other entities, our containers are always 100% our stuff) is they hit the port, get loaded onto rail cars, hit the nearest large depot (for us it's Omaha), and they finish the short remaining trip via truck. The container gets dropped off the flatbed in our freight yard and we unload it, and the container heads back to port.

But now, with containers obviously being in such high demand, shipping companies like Maersk, Evergreen, One, etc., aren't allowing their containers to be loaded onto rail. They are requiring that at the port the containers be emptied, contents loaded onto van trucks, and the containers put immediately back on the ships for the trip back to China. They don't want the containers spending a week in Iowa or Florida, or New Mexico before they have them back in their possession.

This is called transloading, and it fucking sucks. It takes longer and is ridiculously more expensive. What actually happens is your goods get off-loaded into those van trucks, taken back to a warehouse somewhere where you schedule a truck shipment, then they get loaded onto that semi and trucked all the way here. There's a shit ton of labor and administrative cost involved in loading and unloading 40' of cargo twice, and we all know who pays for it.

From what I'm hearing through the massive grapevine, unless your name is Walmart or Amazon or Home Depot, all major shippers are going to require transloading from here on and prohibit rail service using their containers. If you guys thought it was hard to find a truck to haul your shit right now, just you wait. This is bonkers. And it's going to get worse.

So shipping costs on consumers is going to go astonishing high in the future?

 

[MelroseHawkins]

Read Fry's stuff up above. Dude knows what's up. Another issue with the supply chain is that the commodity or product you want to buy may itself be in abundant supply, but the plastic pellets that make the bottle that your shampoo comes in could be stuck in Texas when they need to get to somewhere else to make the bottle. Without the bottle, you got no shampoo. Or it could be something stupid like the ink necessary to mark the bottle or the glue that goes on the back label with the UPC code or something. The stories I am hearing from dudes in manufacturing are crazy. It's eerie.

Yea, I should have read it before I responded and posted. Yes, you all explain it well. What a F'ed up mess.