Date: Thursday, September 16, 2021
It’s mid-August, and logistics manager RoxAnne Thomas’s phone won’t stop pinging. Her faucets, sinks, and toilets are waylaid near Shanghai, snagged in Vancouver, and buried under a pile of shipping containers in a rail yard outside Chicago. As U.S. transportation manager for Gerber Plumbing Fixtures LLC, a unit of Taiwan’s Globe Union Industrial Corp. that’s based in Woodridge, Ill., Thomas is trying to overcome the biggest shock wave to unsettle global trade since the dawn of container shipping almost seven decades ago.
The system underpinning globalization—production on one side of the planet, connected to consumers on the other by trucks, ships, planes, cranes, and forklifts—is too rigid to absorb today’s rolling tremors from Covid-19, or to recover quickly from the jolts to consumer demand or the labor force. It’s avoided a complete collapse only through a combination of human ingenuity, painfully long hours, and, as Thomas describes a recent success, strategy, mixed with a stroke of luck.
What’s also apparent from her vantage point is that supply uncertainties, disruptions, and inflationary forces are here for the foreseeable future, perhaps into 2023. But how things play out this month, one of two peak seasons each year for goods, will be crucial in determining how long these shortages last and which companies are able to adapt. “Every step of the process, there’s still backlog,” said Thomas, 41, in one of several interviews from late July through August. “The beginning of the supply chain in China—I don’t think that’s going to get better for a year.” And the outlook more broadly? “A year and a half before things are truly back to normal.”
Although the pandemic has shuttered factories and shaken supplies of raw materials, Thomas’s chief challenge is freight, and it starts with what used to be cheap, plentiful commodities: shipping containers. About 25 million are in use globally, shuttling goods around the world on some 6,000 ships. Companies such as Denmark’s A.P. Moller-Maersk A/S or China’s Cosco Shipping Holdings Co. own or operate these vessels, with the 10 top companies controlling 85% of global capacity.
Container rates and availability are usually built into annual contracts between shippers and the carriers, and these deals normally have strict requirements, such as only nonstop service between ports or a minimum of two sailings a week. But little by little over the past 18 months, Thomas has had to let those demands go and instead brawl for ship space in the spot market, where the daily rates quoted by carriers and freight agents have soared.
“Now I’m saying, ‘Just get me a box,’ ” she says. “We’re constantly fighting this battle between how much is too much to spend and how many containers can that actually get me, and it literally seems to change week to week.” Wholesalers and commercial plumbers are the main buyers of Gerber’s bathroom fixtures. The company’s biggest domestic competitors are American Standard, Kohler, Mansfield Plumbing Products, and Toto USA.
Two years ago, a 40-foot container cost less than $2,000 to transport goods from Asia to the U.S. Today the service fetches as much as $25,000 if an importer pays a premium for on-time delivery, which is a luxury. That’s translated into big money for container carriers, with the industry on track to post $100 billion in net profit this year, up from about $15 billion in 2020, says John McCown, an industry veteran and founder of Blue Alpha Capital.
With the scales so tipped against them, many shippers of cargo are balking, hoping rates go down or praying that they won’t run out of things. That’s provided openings for Thomas to stretch her budget when possible and snap up the few containers that become available. “There are companies that just don’t have the finances to withstand this, and they have contracted space that they’re just not using anymore,” she says. One of Gerber’s freight forwarders, Flexport Inc. in San Francisco, recently offered a chance to get 50 extra boxes out of Qingdao, China. Even at elevated rates, Thomas jumped at the chance.