World faces shipping crisis

Senior reporter, Business Insider Rachel Premack, joins Yahoo Finance to discuss the factors contributing to the shipping container shortage and how retailers handle these unexpected challenges amid COVID.

Video transcript

- Well, we all know the price of stuff has been going up and to the right. And part of the reason why is that the cost of shipping has been exploding over the last six months. And we have really seen the crunch come in on containers going from Asia to the United States. Last week, Rachel Premack, senior reporter at Insider covered this dynamic in a big story on the shipping space.

Now, Rachel, you usually cover the logistics and trucking industry. But of course shipping is now become a part of that. And the part of the story that really stood out to me, and I'd be curious kind of what folks told you about this, is that there's a lack of empty containers. Like stuff doesn't make its way from the US back to Asia. I mean, is it because there's just ships sitting outside the Port of LA? I mean, what's really driving that problem?

RACHEL PREMACK: Right. So container prices are really at an unprecedented rate right now. And part of the reason, it's not so much that there is a shortage of containers but a shortage of containers where we need them to be. So part of the issue is that right now, there are something like 300 vessels just around the world waiting to be docked. And those vessels are, of course, using valuable containers that we need to put our stuff in. So that's one reason why there is a quote, "container shortage right now".

The other reason is that, you know, from exports from Asia to North America or to Europe are far above what they have been in previous years. But imports-- you know, US or Europe sending stuff back to China, that's way down. So the containers, the flow of containers usually going from the US and Europe back to Asia, those are not in circulation anymore. So we have all this stuff, all of these products waiting to be put into containers and shipped out. But there is nothing to put them in right now.

- Rachel, in doing your reporting for this story, what surprised you the most?

RACHEL PREMACK: So one thing that actually did quite surprise me is that the fact that the world's largest shipping container, shipping companies, think about Maersk or Hapag-Lloyd, they're really killing it right now. So even though global supply chains are in such a crisis, it's actually a good point for America and its allies in the-- all these top shippers.

So for instance, Maersk, they lost money, 3 out of the 4-- 3 out of the 4 past financial years. But in 2020, they made billions of dollars in profit. And that's really just because of all these-- just the various choke points and the various areas in which people are having issues shipping the things out that they need. That those sort of hot raising rates are beneficial for them.

- And Rachel, you talked a little bit on the story about labor shortages. Which we know have been affecting a little bit of everything. You know, I think of longshoremen as folks who make a decent living already. These are not minimum wage workers, right. And so I'm curious. Are the shipping companies having to raise wages though to get people back on the job?

RACHEL PREMACK: Right. It is not just longshoremen who are in a shortage right now. I mean, they're actually working harder than ever. They're really out there. And they are, as you mentioned, definitely not minimum wage workers. But there are all these other sorts of points in the process in which we are having fewer people out there and available.

One major area is truck drivers. So typically, port truck drivers are the ones who are helping moving those loads from the ports back to warehouses, or onto rail cars, or wherever they may need to be. And the trucking industry right now is saying that there are fewer people interested in the truck driver job. And that is partially-- one major reason for that is simply that the job does not pay as well as it used to. So there is a shortage of trucking labor because of that.

And then if you look at certain ports globally, one issue is that there are still coronavirus outbreaks happening at those ports. And there are fewer people working there. And that does in turn affect, you know, global shipping here in the US and all over the place.

- And, you know, Rachel, you alluded to it a little bit there. But I'm just curious because again, you're mostly focusing in your work on the trucking industry. I'm just curious what the spillover or related effects have been here between a lack of availability of drivers, a lack of availability of longshoremen to offload these shipping containers, and what your contacts in the industry are telling you about anything like a resolution to these problems. Because people are still getting quoted several months for what seemed like fairly basic, you know, household durables.

RACHEL PREMACK: Right. So unfortunately for consumers, It seems that won't be until early next year that these problems are resolved. This could also have pretty major implications for the Christmas shopping season. It does seem that it will take several months, six months or more for these issues to sort themselves out. One prediction I've heard is probably key one of 2022. Because that is when manufacturing slows down anyways for the Chinese New Year.

So January or February of 2022 is hopefully when this crisis will resolve itself. But until then, experts are saying that shipping container prices are only going up from here. They're only going up from these already unprecedentedly high rates.

- All right, there you go. Good news for consumers everywhere. The price of shipping stuff is not going down anytime soon, all right. All right, Rachel Premack, reporter over at insider. Rachel, thanks so much for jumping on this.