Have you noticed that delivery delays are becoming a lot more frequent recently? That’s because a new set of supply chain disruptions are impacting the shipping and trucking industry right now.
Both maritime and road transportation companies are facing labor and capacity issues, increased costs, and bankruptcies in recent months, and these problems are rapidly pushing freight and shipping rates to levels last seen in the 2021 crisis, when supply chain bottlenecks triggered a 500% spike in transportation costs, consequently making the price of the items we buy and consume shoot up at retail stores and supermarkets from all around the nation.
So far this year, three of the biggest trucking companies in the U.S. have collapsed, and the latest of such incidents is threatening to bring widespread empty shelves back to our local stores in the next few weeks. The 2023 supply chain nightmare has already begun, and today, we’re going to reveal what’s truly behind this crisis.
While major shipping companies continue to report better-than-expected financial results, freight rates are now averaging $3,998 per forty-foot equivalent unit, meaning that they’re 85% more expensive than before the outbreak hit the U.S., according to data provided by Hapag-Lloyd, the world’s fifth-largest shipping line.
These rates are expected to soar even more during the fall, the U.S. peak importing season. In the past two weeks alone, the average spot-market price to ship a 40-foot container from Asia to the US West Coast rose 34%, as reported by transport data firm Xeneta.
Conditions have changed drastically in recent months, as major shipping companies have gone under, erasing capacity and eliminating thousands of jobs from the system. In order words, the labor issues that caused U.S. ports to be clogged up just a couple of years ago, and wreak havoc on the trucking industry due to a shortage of drivers
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Yellow was a 99-year-old firm, that became famous for its competitive prices, and its huge fleet of over 12,000 trucks that shipped freight across America for big brands such as Walmart and Home Depot. As it turns out, the firm’s bankruptcy will affect more than just the supply chain, but also American taxpayers because Yellow owed the federal government a huge amount of money. As of late March, the company had an outstanding debt of about $1.5 billion. Of that, $729.2 million was owed to the federal government.
The U.S. job market is going to suffer, too. Yellow’s closure is the biggest in terms of jobs and revenue in the U.S. trucking industry, according to industry experts. Over 30,000 workers were left without jobs due to the firm’s bankruptcy. Even the cost of sending packages between states is going up this month.
The US Postal Service increased the cost of Priority Mail by about 5.5%. Priority Mail Express became 6.6% more expensive, First Class Package Service prices were bumped up by 7.8% and Priority Mail commercial rates increased by about 3.6%. That’s why we should all start getting ready for chaos at supply chains once again.
The catalysts of this crisis may be different from last time, but they’re creating problems just as severe as those we have faced before. After supply chains have been broken, they were never the same, and every time a new bottleneck emerges, we are at risk of seing cascading failures on the system that can rapidly plunge our entire country into disarray.
Article and video cross-posted from Epic Economist.