Ships and Shipping

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    What an Adult Tricycle Says About the World’s Bottleneck Problems

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    The supply-chain problems rocking companies may get worse heading into the holidays, as delays continue to snarl global trade and shipping prices jump even higher.Catrike has 500 of its three-wheeled bikes sitting in its workshop in Orlando, Fla., nearly ready to be sent to expectant dealers. The recumbent trikes have been waiting for months for rear derailleurs, a small but crucial part that is built in Taiwan.“We’re sitting on $2 million in inventory for one $30 part,” said Mark Egeland, the company’s general manager.The company’s problems offer a window into how supply-chain disruptions are rocking companies in the United States and around the world, pushing inflation higher, delaying deliveries and exacerbating economic uncertainty.It is unclear when the snarls will clear up — and it’s possible they will get worse before they get better. The holiday season is right around the corner, American companies are running light on inventory, and coronavirus outbreaks continue to shut factories around the world. Demand for goods remains strong as households use money saved during months stuck at home to buy athletic equipment, couches and clothing.That could keep pressure on global goods producers and the transportation routes that serve them even as consumers begin to redirect their spending back toward dinners out and theater tickets — a shift that many analysts had hoped would help supply chains return to normal.The critical questions for economic policymakers are how long the problems will last and how much they will feed into consumer prices, which have jumped sharply this year, both because of data quirks and bottlenecks. Federal Reserve officials regularly say they expect the faster price gains to prove “transitory,” but they are careful to stress that supply chains are a major source of lingering uncertainty, making it unclear how quickly rapid gains will fade.“I’m less in that ‘transitory’ camp,” said Phil Levy, the chief economist at Flexport, which tracks ocean shipments and helps importers plan so that their parts can get in by desired dates. “And more in the ‘we have reason to be concerned’ camp.”Container costs have rocketed up. Earlier this month, container shipping rates from China and East Asia to the United States’ East Coast climbed above $20,000, compared with about $4,000 a year ago, according to data from the freight-tracking firm Freightos. Those attractive high prices are encouraging ships to abandon other routes, causing the problem to spread. And shipping issues have been exacerbated by related imbalances: Boats are backing up at ports, and as demand for goods booms in the United States, empty shipping containers haven’t been able to get back to China fast enough.Chris Miller assembling a wheel for a Catrike. The company thinks that sorting out its supply issues could take 12 to 18 months.Octavio Jones for The New York TimesSome suppliers are eating higher production and transport costs. Full Speed Ahead, which produces crank sets for Catrike, has seen expenses increase as the demand for raw aluminum has risen. Shipping costs are also four to five times what they were a year ago, said Mark Vandermolen, the company’s managing director.Full Speed Ahead has passed “very little, if any at all,” of those cost increases on to customers, he said, and he hopes to “maintain pricing for as long as possible until it is no longer sustainable.”But not all of Catrike’s suppliers have absorbed climbing costs, and whether higher prices for components make for more expensive consumer products — actual inflation, as it is conventionally measured — depends on how companies like Catrike and the dealers they work through decide to adjust.Catrike raised prices by $200 early this year, its first adjustment since 2010, to cover costs. But the company is at a “sweet spot” where it’s outperforming competitors by offering affordable products, so it would prefer to leave prices steady now, Mr. Egeland said.He’s also cautious: Catrike hasn’t printed prices in its newest catalog, in case rising expenses make another increase necessary.The Fed — which has primary responsibility for keeping inflation steady — has made clear that it is content to look past a recent pop in inflation. If companies lift prices once or twice amid reopening challenges, the central bank can tolerate that as a one-off change.Officials would worry more if price increases dragged on for months or years. If that happens, consumers and businesses alike could come to expect consistently higher prices. They might demand higher pay, and a cycle of inflationary increases could take off.It will take time to know whether the bottlenecks will lead to more permanent damage. Supply chains are still badly snarled. The time it takes for parts from one of Catrike’s suppliers to arrive by sea in North America from a factory in Indonesia has jumped to three months, and sometimes it takes four — double what it took before. Estimates from Flexport confirm the problem is widespread along that shipping route. More

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    Global Shortages During Coronavirus Reveal Failings of Just in Time Manufacturing

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    Global shortages of many goods reflect the disruption of the pandemic combined with decades of companies limiting their inventories.In the story of how the modern world was constructed, Toyota stands out as the mastermind of a monumental advance in industrial efficiency. The Japanese automaker pioneered so-called Just In Time manufacturing, in which parts are delivered to factories right as they are required, minimizing the need to stockpile them. More

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    Suez Canal Is Open, but the World is Still Full of Giant Container Ships

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    As global trade has grown, shipping companies have steadily increased ship sizes — but the Suez Canal blockage showed that bigger is not always better.The traffic jam at the Suez Canal will soon begin easing, but behemoth container ships like the one that blocked that crucial passageway for almost a week and caused headaches for shippers around the world aren’t going anywhere.Global supply chains were already under pressure when the Ever Given, a ship longer than the Empire State Building and capable of carrying furnishings for 20,000 apartments, wedged itself between the banks of the Suez Canal last week. It was freed on Monday, but left behind “disruptions and backlogs in global shipping that could take weeks, possibly months, to unravel,” according to A.P. Moller-Maersk, the world’s largest shipping company.The crisis was short, but it was also years in the making.For decades, shipping lines have been making bigger and bigger vessels, driven by an expanding global appetite for electronics, clothes, toys and other goods. The growth in ship size, which sped up in recent years, often made economic sense: Bigger vessels are generally cheaper to build and operate on a per-container basis. But the largest ships can come with their own set of problems, not only for the canals and ports that have to handle them but for the companies that build them.“They did what they thought was most efficient for themselves — make the ships big — and they didn’t pay much attention at all to the rest of the world,” said Marc Levinson, an economist and author of “Outside the Box,” a history of globalization. “But it turns out that these really big ships are not as efficient as the shipping lines had imagined.”Despite the risks they pose, however, massive vessels still dominate global shipping. According to Alphaliner, a data firm, the global fleet of container ships includes 133 of the largest ship type — those that can carry 18,000 to 24,000 containers. Another 53 are on order.The world’s first commercially successful container trip took place in 1956 aboard a converted steamship, which transported a few dozen containers from New Jersey to Texas. The industry has grown steadily in the decades since, but as global trade accelerated in the 1980s, so did the growth of the shipping industry — and ship size.One container ship among many that were anchored in February outside the Port of Los Angeles, where congestion kept ships waiting to unload for days.  Coley Brown for The New York TimesIn that decade, the average capacity of a container ship grew 28 percent, according to the International Transport Forum, a unit of the Organization for Economic Cooperation and Development. Container ship capacity grew an additional 36 percent in the 1990s. Then, in 2006, Maersk introduced the Emma Maersk, a massive vessel that could hold about 15,000 containers, almost 70 percent more than any other vessel.“Instead of this pattern of small increases in capacity over time, all of a sudden we had a quantum leap, and that really set off an arms race,” Mr. Levinson said.Today, the largest ships can hold as many as 24,000 containers — a standard 20-foot box can hold a pair of midsize sport utility vehicles or enough produce to fill one or two grocery store aisles.The growth of the shipping industry and ship size has played a central role in creating the modern economy, helping to make China a manufacturing powerhouse and facilitating the rise of everything from e-commerce to retailers like Ikea and Amazon. To the container lines, building bigger made sense: Larger ships allowed them to squeeze out savings on construction, fuel and staffing.“Ultra Large Container Vessels (U.L.C.V.) are extremely efficient when it is about transporting large quantities of goods around the globe,” Tim Seifert, a spokesman for Hapag-Lloyd, a large shipping company, said in a statement. “We also doubt that it would make shipping safer or more environmentally friendly if there would be more or less-efficient vessels on the oceans or in the canals.”Maersk said it was premature to blame Ever Given’s size for what happened in the Suez. Ultra-large ships “have existed for many years and have sailed through the Suez Canal without issues,” Palle Brodsgaard Laursen, the company’s chief technical officer, said in a statement on Tuesday.But the growth in ship size has come at a cost. It has effectively pitted port against port, canal against canal. To make way for bigger ships, for example, the Panama Canal expanded in 2016 at a cost of more than $5 billion.That set off a race among ports along the East Coast of the United States to attract the larger ships coming through the canal. Several ports, including those in Baltimore, Miami and Norfolk, Va., began dredging projects to deepen their harbors. The Port Authority of New York and New Jersey spearheaded a $1.7 billion project to raise the Bayonne Bridge to accommodate mammoth ships laden with cargo from Asia and elsewhere.Three large cranes arrived at the Port of Oakland in January, allowing it to receive the biggest ships in North America.Jim Wilson/The New York TimesThe race to accommodate ever-larger ships also pushed ports and terminal operators to buy new equipment. This month, for example, the Port of Oakland erected three 1,600-ton cranes that would, in the words of one port executive, allow it to “receive the biggest ships.”But while ports incurred costs for accommodating larger ships, they didn’t reap all of the benefits, according to Jan Tiedemann, a senior analyst at Alphaliner.“The savings are almost exclusively on the side of the carrier, so there was an argument that the carriers have been in the driving seat and have just pushed through with this big tonnage, while terminal operators, ports and, in some cases, the taxpayer have footed the bill,” he said.The shift to bigger ships also coincided with and contributed to industry consolidation that has both limited competition among shipping giants and made the world more vulnerable to supply disruptions. Buying and maintaining large vessels is expensive, and shippers that couldn’t afford those costs had to find ways to become bigger themselves. Some firms merged, and others joined alliances that allowed them to pool their ships to offer more frequent service.Those trends aren’t necessarily all bad. The alliances allow shippers to offer expanded service and help keep costs low for customers. And the fact that bigger ships cut fuel costs has helped the industry make the case that it is doing its part to reduce planet-warming emissions.But the argument for even bigger ships may finally be fading, even for container lines themselves — a concept known in economics as the law of diminishing returns.For one, the benefits of building bigger tend to shrink with each successive round of growth, according to Olaf Merk, the lead author of a 2015 International Transport Forum report on very big ships. According to the report, the savings from moving to ships that can carry 19,000 containers were four to six times smaller than those realized by the previous expansion of ship size. And most of the savings came from more efficient ship engines than the size of the ship.“There’s still economies of scale, but less and less as the ships become bigger,” Mr. Merk said.The bigger vessels can also call on fewer ports and navigate through fewer tight waterways. They are also harder to fill, cost more to insure and pose a greater threat to supply chains when things go wrong, like Ever Given’s beaching in the Suez Canal. Giant ships are also designed for a world in which trade is growing rapidly, which is far from guaranteed these days given high geopolitical and economic tensions between the United States and China, Britain and the European Union, and other large trading partners. More

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    Trade With China Roars Back As Americans Are Stuck At Home

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    AdvertisementContinue reading the main storySupported byContinue reading the main storyWith Americans Stuck at Home, Trade With China Roars BackReducing trade with China was supposed to happen in 2020. But demand for Chinese goods has soared amid pandemic lockdowns.Cargo containers at the Port of Oakland in California. U.S. consumer demand is so strong that many supply chains are clogged, snarling major ports and delaying delivery of holiday gifts by several weeks.Credit…Jim Wilson/The New York TimesDec. 14, 2020阅读简体中文版閱讀繁體中文版WASHINGTON — American imports from China are surging as the year draws to a close, fueled by stay-at-home shoppers who are snapping up Chinese-made furniture and appliances, along with Barbie Dream Houses and bicycles for the holidays.The surge in imports is another byproduct of the coronavirus, with Americans channeling money they might have spent on vacations, movies and restaurant dining to household items like new lighting for home offices, workout equipment for basement gyms, and toys to keep their children entertained.That has been a boon for China, the world’s largest manufacturer of many of those goods. In November, China reported a record trade surplus of $75.43 billion, propelled by an unexpected 21.1 percent surge in exports compared with the same month last year. Leading the jump were exports to the United States, which climbed 46.1 percent to $51.98 billion, also a record.That surge has defied the expectations of American politicians of both parties, who earlier this year predicted that the pandemic, which began in China, would be a moment for reducing trade with that country and finally bringing factories back to the United States.“The global pandemic has proven once and for all that to be a strong nation, America must be a manufacturing nation,” President Trump said in May. “We’re bringing it back.”But despite Mr. Trump’s restrictions on Chinese goods, including tariffs on more than $360 billion worth of its imports, there is little sign that global supply chains are returning to the United States. Instead, the prolonged effects of the pandemic on the United States appear to have only reinforced China’s manufacturing position.China employed draconian lockdowns and extensive surveillance to shake off the effects of the pandemic earlier this year, allowing its factories to reopen at a large scale more quickly than businesses in America, where the disease is still running rampant. With many American companies, especially those based on services, crippled by coronavirus, consumers are pumping their money into online shopping for manufactured goods instead.Mary E. Lovely, a senior fellow at the Peterson Institute, said that U.S. imports from the world were on track to be lower this year than in 2019, but that China’s overall share of U.S. imports would likely increase.“Overall, China’s quick economic recovery and its dominance as a source for products that Americans have turned to during the pandemic have outweighed the dampening effect of Trump’s tariffs,” she said.Consumer demand is so strong that it has overwhelmed the capacity of the cargo industry, leading to a record spike in shipping rates. The surge in shipments is clogging many supply chains, snarling major ports and delaying delivery of holiday gifts by up to several weeks.At the Port of Los Angeles, the country’s largest processor of container cargo and the gateway for many Chinese goods, shipping containers carrying Chinese imports are stacked like Legos in piles six high. Truckers jam the parking lots, waiting hours to pick up goods, which are then dispatched across the continent.October was the busiest month in the port’s 114-year history, and traffic has remained high. On Dec. 1, dockworkers were busy unloading 19 vessels, compared with 10 to 12 on a normal day, said Gene Seroka, the port’s executive director. Twelve more ships waited in the harbor, which, on average, had been waiting about 48 hours beyond their scheduled arrival, he said.“We’re going through a time that truly is unprecedented,” Mr. Seroka said. “You’re trying to stuff 10 pounds of potatoes in a five-pound bag. This ordering and replenishment is bigger than anything we’ve seen, and now it coincides with holidays.”The pileup started earlier this year, as American retailers and manufacturers began to restock products this summer after brief lockdowns in the spring, and consumer spending began to rebound. While the pandemic has left former employees of restaurants, airlines and theme parks destitute, many members of the country’s vast remote work force have seen their bank accounts grow, and surveys show expectations for consumer spending remain strong.The initial data snapshot of November trade released earlier this month by China’s General Administration of Customs did not include detailed data by product and country. But trade data for the first 10 months of this year, compiled from United States Customs data by IHS Markit, shows that American imports of consumer electronics from China have been strong, as have imports of masks and other personal protection equipment for the pandemic.Jay Foreman, chief executive of the toy company Basic Fun!, said his company had gone from being “panicked” about the future of its business in March and April to suddenly realizing that demand was stronger than ever.“Especially as you got into June, July and August, the spigot got turned on,” he said. “Everybody realized we don’t need less stuff from Asia and China, we need more stuff.”Closed storefronts in Los Angeles. With many American businesses crippled by the coronavirus, consumers are pumping their money into online shopping instead.Credit…Philip Cheung for The New York TimesFor the toy industry, it is shaping up to be one of the biggest holiday seasons in years. But Mr. Foreman said his business would be dampened somewhat by the shipping delays. Some of the Tonka Trucks, Lite Brite sets and Care Bears that the company sells are currently stuck on container ships, or in the yard of the Port of Los Angeles.While Mr. Foreman was confident he could still sell those toys in January, he said missing the Christmas cutoff would be much more problematic for small companies and importers of seasonal products, like wreaths and Christmas lights.“Everyone has stuff sitting,” he said. “Everything is a week or two behind schedule.”Arnold Kamler, the chief executive of bicycle-maker Kent International Inc., said he was also experiencing a historic combination of strong demand and shipping delays.Business & EconomyLatest UpdatesUpdated Dec. 15, 2020, 7:19 a.m. ETSolar energy had one of its best years in the U.S. despite the pandemic.U.S. stocks set to open higher as vaccine rollout outweighs virus restrictions.Millions are about to lose jobless benefits. Expect a sharp drop in spending.Lockdowns in China earlier this year led to production delays at Kent’s Chinese factories, while American demand for bicycles began to surge, as buyers sought them for entertainment and exercise, as well as an alternative to public transportation.Pandemic-related demand for bicycles was so strong that some had begun referring to them as “the new toilet paper,” Mr. Kamler said.“I never had hoped to be compared to toilet paper, but in this case, this was a good thing,” he said.After maintaining light inventory all year, Mr. Kamler said his company had finally accumulated enough bicycles in its warehouses in California and South Carolina in the past four to six weeks to meet demand. But UPS and FedEx, which deliver the company’s bicycles directly to customers on behalf of Target, Kohl’s, Walmart and other retailers, have drastically cut the number of trucks they can dispatch to the warehouses each week.“We can’t get trucks to show up,” he said. “It’s crazy to have this demand and not be able to ship it.”That surge has created an unusual problem for China: finding enough 40-foot steel boxes into which all those goods can fit. China’s exports have been so strong this autumn that far more shipping containers are leaving Chinese ports than are coming back.American exports to China have also soared this fall, driven by strong purchases of soybeans and other agricultural goods under the U.S.-China trade agreement. But these goods — like the iron ore and coal that China also imports plentifully — travel in bulk freighters, not 40-foot containers. China imports few American manufactured goods that would travel in containers.Mr. Seroka said exports of containers stocked with American goods were down 14 percent annually so far this year at the L.A. port, creating inefficiencies and logistical issues for railroads, trucking companies and cargo lines.In the month of October, the port exported more than twice as many empty containers as those filled with American goods, Mr. Seroka said. He blamed the trend on the U.S.-China trade war, which spurred Beijing to impose more tariffs on American products, as well as the strength of the U.S. dollar, which makes American goods more expensive overseas.For both importers and logistics companies, it remains unclear how U.S. trade policy will shape their business in China in the years to come.President-elect Joseph R. Biden Jr. has not committed to lifting any of Mr. Trump’s tariffs, saying he will begin reviewing them once in office. Many of the exemptions that companies received from the tariffs are set to expire on Dec. 31, and the Trump administration has not said whether they would renew them.Chris Rogers, a global trade and logistics analyst at Panjiva, said that the trade wars and tariffs that the United States placed on China had actually reduced imports of the particular goods that were hit with tariffs — but other products that have not been taxed are booming. He said that companies could still choose to relocate their production out of China, as their businesses emerge from the pandemic.“The time to muck about with your supply chain is not during the pandemic,” Mr. Rogers said. “A lot of companies have been in cash preservation mode. Moving your supply chain is expensive and takes time. There clearly is an opportunity for companies coming out of the pandemic to say we need to build resilience, move manufacturing closer to consumers.”Despite the shipping disruptions, some companies that have kept their production in China throughout Mr. Trump’s trade wars are now feeling vindicated.Mr. Foreman said he considered moving some operations to Vietnam or India, like many toymakers did amid the trade wars last year, but “staying in China ended up to be the best move.”“China still has the best production supply chain of anybody in the world, and as it turned out, they were able to tackle the pandemic faster and more efficiently than anybody else,” he said. “China certainly has tested the boundaries and proven that they can weather the storm, as great as a storm as we’ve seen in a hundred years.”Keith Bradsher contributed reporting from Shanghai.AdvertisementContinue reading the main story More