Cargo Is Piling Up Everywhere, And It's Making Inflation Worse

Jun 21, 2021
Originally published on June 21, 2021 11:27 am

John Nephew thought he had a winner with a new tabletop game called Dice Miner. Importing the games from China turned out to be its own roll of the dice.

Nephew, founder of Atlas Games in Duluth, Minn., ordered a 40-foot cargo container full of games from Shanghai in December, anticipating delivery in about six weeks.

Instead, the games took nearly six months to arrive — an increasingly common example of the supply chain bottlenecks pushing inflation to its highest level in more than a dozen years.

"We were booked on something like eight different shipping voyages in a row, and had them canceled from under us," Nephew says.

Soaring demand from Americans for everything from iPads to cars is leading to a surge in freight crossing the Pacific, hitting business owners such as Nephew.

When the cargo with his games finally arrived on the West Coast, the container was immediately emptied so it could be sent back to China for another load.

The games then continued on to Minnesota by truck, rather than rail, which would have been more economical. The final shipping cost was about $12,000, at least 50% more than the game maker had budgeted.

Businesses around the country are wrestling with similar challenges in getting their goods.

The Port of Los Angeles just logged its busiest month in history, handling more than 1 million shipping containers in May, more than half loaded with imports from Asia.

"We feel the importer and exporter pain," says Gene Seroka, executive director of the country's busiest cargo port. "The impacts that all of this has had is noticeably hurtful to these men and women who are trying to do their jobs in the supply chain."

Seroka adds, "This just continues to show the strength of the American consumer during this pandemic-induced buying surge."

The record volume of cargo has overwhelmed longshoremen, truck drivers, warehouses and railroads. Vessels are waiting up to five days just to get into port, and it can take 10 more days for a container to be loaded on a train.

Container ships and tankers are anchored close to the ports of Los Angeles and Long Beach in February. The Port of Los Angeles logged its busiest month in history in May.
Mario Tama / Getty Images

Things aren't quite so busy on the East Coast. But the cost of bringing a refrigerated container from Italy to New Jersey has soared to $10,000, more than twice the going rate before the pandemic.

"They say there's not enough containers in Europe, lack of space on the boats," says Philip Marfuggi, CEO of the Ambriola Co. and a board member of the Cheese Importers Association of America.

It not only takes up to twice as long for shipments to arrive, he says, but deliveries have become less predictable.

"Like the other day, I had eight containers show up," Marfuggi says. "They should have been like two a week. And then all of a sudden, they all showed up at once."

All of this unpredictability creates costs and headaches for businesses that had grown accustomed to reliable, just-in-time delivery.

Federal Reserve Chair Jerome Powell said these "bottleneck effects" have been larger than he and his colleagues anticipated, prompting the central bank to raise its forecast for inflation this year to 3.4%. But Powell expressed confidence that the cargo constraints won't last indefinitely.

"Prices like that, that have moved up really quickly, because of the shortages and bottlenecks and the like — they should stop going up, and at some point they in some cases should actually go down," Powell told reporters last week.

The Biden administration has created a task force to address the most urgent shortages – such as computer chips – while also looking for ways to build more resilient delivery networks for the future.

"One of the things the pandemic exposed is just the degree of vulnerability we have across our supply chain," said Brian Deese, director of the president's National Economic Council.

President Biden holds a microchip before signing an executive order on securing critical supply chains in February. A shortage of chips after a surge in demand hampered key sectors such as carmakers.
Saul Loeb / AFP via Getty Images

As pandemic fears recede and people are able to spend more of their money on travel and entertainment, demand for goods is expected to decline.

But it could take months to untangle the traffic jam. With back-to-school and holiday shopping seasons still to come, the Port of Los Angeles is likely to remain extremely busy through the fall. Seroka thinks it will be early next year before cargo volumes shrink back to more normal levels.

That's bad news for business owners such as Nephew, who is already bracing for even higher shipping costs after he already had to pay 50% more to ship his Dice Miner games.

"It's just a mess," Nephew says. "That shipping price is going to look like a bargain within the next couple of weeks."

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RACHEL MARTIN, HOST:

Americans have been buying a record amount of stuff during the pandemic. And that's exposed some weak links in supply chains. Inventories are shrinking. Delivery times are growing. And prices are soaring. The Federal Reserve says supply chain bottlenecks are one of the factors driving inflation to its highest level in more than a dozen years.

NPR's Scott Horsley reports on how some businesses are trying to cope.

SCOTT HORSLEY, BYLINE: John Nephew runs a Minnesota company that sells tabletop games in the style of Dungeons and Dragons. One of his newest offerings is called Dice Miner.

JOHN NEPHEW: So it's a game about dwarves who are mining in a mountain. It's a dice drafting game.

HORSLEY: The games are manufactured in China. And these days, the cargo business is its own roll of the dice. Last Christmas, Nephew ordered a 40-foot shipping container full of games. And he expected delivery in about six weeks. The games finally arrived in a little under six months.

NEPHEW: We were booked on something like eight different shipping voyages in a row and had them cancelled from under us.

HORSLEY: There's so much freight coming across the Pacific now, Nephew's shipment kept getting bumped. And when it finally arrived on the West Coast, the container was immediately emptied, so it could be sent back to China for another load. The games continued on to Minnesota by truck rather than rail. The final shipping cost from Shanghai to Duluth was about $12,000, at least 50% more than Nephew had budgeted.

NEPHEW: That shipping price is going to look like a bargain within the next couple of weeks, with the way that things are looking. It is just a mess.

HORSLEY: Gene Seroka hears a lot of stories like this. As executive director of America's busiest cargo port in Los Angeles, Seroka's been getting an earful from frustrated shippers.

GENE SEROKA: We feel the importer and exporter pain, no doubt about it. The impacts that all of this has had is noticeably hurtful to these men and women, who are trying to do their jobs in the supply chain.

HORSLEY: The Port of LA just logged its busiest month in history. Well over half a million shipping containers arrived on the docks to satisfy America's booming demand for Asian imports.

SEROKA: This just continues to show the strength of the American consumer during this pandemic-induced buying surge.

HORSLEY: The record volume of cargo has overwhelmed longshoremen, truck drivers, warehouses and railroads. Vessels are waiting up to five days just to get into port. And it can take 10 more days for a container to be loaded on a train.

Things aren't quite so busy on the East Coast. But Philip Marfuggi says he's paying more than twice as much as he did before the pandemic to ship a container of cheese from Italy to New Jersey. Shipping times have not only gotten longer but also less predictable.

PHILIP MARFUGGI: Like, the other day, I had eight containers show up. They should have been, like, two a week. Then all of a sudden, they all showed up at once.

HORSLEY: All of this creates costs and headaches for businesses that had grown accustomed to reliable, just-in-time delivery.

Federal Reserve Chairman Jerome Powell says he and his colleagues have been surprised at how much prices have increased as a result. But Powell expressed confidence the bottlenecks won't last forever.

(SOUNDBITE OF ARCHIVED RECORDING)

JEROME POWELL: Prices like that, that have moved up really quickly because of the shortages and bottlenecks and the like - they should stop going up. And at some point, they, in some cases, should actually go down.

HORSLEY: The Biden administration has created a task force to address the most urgent shortages, like computer chips. Brian Deese, who heads the president's National Economic Council, says the task force will also look at building more resilient delivery networks for the future.

BRIAN DEESE: One of the things the pandemic exposed is just the degree of vulnerability we have across our supply chain.

HORSLEY: As pandemic fears decline and we're able to spend more of our money on travel and entertainment, Americans are expected to dial back our purchases of stuff. But that's likely to take a while. The busiest months for the Port of LA are usually around the back-to-school and holiday shopping seasons. Director Seroka says it's likely to be early next year before cargo volumes shrink back to normal.

Scott Horsley, NPR News, Washington.

(SOUNDBITE OF YPPAH AND JOSEF PETERS' "INTO THE STRATOSPHERE") Transcript provided by NPR, Copyright NPR.