Containeritis…could be a bigger problem for Thailand than Covid for 2022

[webfact]

 

While everyone is worried about the spread of Omicron, a far bigger problem looms ahead for all of us in 2022.

 

Containeritis, which is already starting to have a massive impact on all our lives is in fact not a virus, but an issue regarding containers.

 

Over 95% of all imports arrive by containers, and many Western households rely on goods from the East.

 

Recently several Thai manufacturers have had to turn down desperately needed contracts from abroad, as not only are they suffering from labour shortages, but also cannot guarantee to make deliveries on schedule.

 

Most contracts with retailers do not include paying extra for price rises in shipping costs, leaving the Asian manufacturer to foot any increases alone.

 

Prices rises in the Supermarkets

 

Here in Thailand, large supermarkets have been forced to raise prices due to delivery increases. 

 

Apart from the price of pork skyrocketing due to a local issue with swine fever, everyone is now noticing larger bills for their weekly shop at checkouts than last year.

 

Surging shipping costs have driven up prices for some consumer products by 10%, a new UN report finds. 

 

The rate for a single shipping container has skyrocketed over the last 18 months as the coronavirus pandemic disrupted supply chains and trade channels.

 

In China, the shipping costs increased by about 360% last year, which has severely affected the companies that rely on moving goods. 

 

Increased shipping demand and container shortage have made shipping from China and other countries very expensive.

 

Containers to be made in Asia

 

Seeing an opportunity, Steel giant Hoa Phat Group has received a permit to build a VND2.4 trillion ($104.64 million) container manufacturing plant in Vietnam, in the southern province of Ba Ria-Vung Tau.

 

The plant, when complete, will have the capacity to produce 500,000 twenty-foot equivalent units (standard size) a year. 

 

But Hoa Phat has two advantages that could help it compete with Chinese manufacturers: its own hot-rolled coil steel plant that has proven successful in making the metal box, and cheaper labor in Vietnam.

 

This new plant will also help other Asian neighbours source their containers in the future.

 

Many western ports especially in the States are also adding to the problem as they have not invested in the latest tracking devices, and they also have labour shortages of drivers to actually take the container to the stores.

 

Bottom line is the next pair of trainers, or the latest mobile you plan to buy, is not only going to be harder to find, but the prices are likely to rise dramatically.

 

-- © Copyright  ASEAN NOW 2022-01-14

 

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[DaLa]

I have been running my Export business for the last 10 years and was advised that there was a container shortage east to west and that a premium would need to be paid in order to secure a shipment. Now , you would have thought that as (supposedly) there were too many boxes in the west and they needed to get them back to the east to relieve the problem there would be reduced rates west to east so that they could achieve this.

 

No way, the rates west to east increased as well.  The problem with the logistics  business with regard to shipping is that you have very little options. You can plan ahead and agree a price with your customer at the end point and then the shipping companies can increase their prices with very little notice and you have no other options.

 

The problem you have highlighted is also exacerbated by new rules for container ships on emissions  that raised the prices by 10%.  Oh well I suppose the end customer will understand (not).  These additional costs are going in my t's and c's now. But the customer (wholesaler) knows I'm not sending the box back.

[Guest Isaanlife]

Building a new plant in Vietnam and not Thailand.

 

Imagine that!

[Guest Isaanlife]

1000's of containers on the ground in California.

 

No trucks to move the containers to all points across the USA.

[RichardColeman]

I disagree with this story of Containeritus being a bigger problem. I think continuing 'governmentstupiditytovirusitus' is far more of a threat and some countries have far stronger strains of it than others meaning they are now in life support

Edited January 14, 2022 by RichardColeman

[Tropicalevo]

50 minutes ago, Isaanlife said:

Building a new plant in Vietnam and not Thailand.

 

Imagine that!

I certainly would not recommend a large financial investment in a major project here under the current government.

They have zero business acumen and even less ethical values.

Edited January 14, 2022 by Tropicalevo

[RandiRona]

No problemo. Thai Water buffalo at rescue!!

Haul anything or everything....sponsored by falangs!!

 

[Saanim]

1 hour ago, Tropicalevo said:

I certainly would not recommend a large financial investment in a major project here under the current government.

They have zero business acumen and even less ethical values.

What do you think how much "business acumen" had had the previous govts that enabled the Thai economy growth to the current level?  Just curious...

 

[spidermike007]

From what I have read, the prices of freight continue to drop. A container was as high as $20,000 or more last year. Now? Prices are skyrocketing in the US right now, and the 7% inflation number they are throwing around is complete nonsense. It is likely closer to 20%. Here? I see some inflation, but nothing like back there. 

 

In Shanghai, the average prices for 40ft HC containers fell by 21% from US $6686 in September to US $5746 as on 1st December. In Tianjin, this drop was 16%, Yantian 12%, Shenzhen close to 7%, Qingdao 23%, and Dalian 11%.
Shanghai ranks third for average prices of 40 feet high cube container at $5746 as on December 1, 2021, after Livorno at $6700 and Singapore at $5775.

 

https://www.hellenicshippingnews.com/shipping-containers-prices-decline-further-in-december-container-availability-scenario-distressing/

 

 

[spidermike007]

1 hour ago, Tropicalevo said:

I certainly would not recommend a large financial investment in a major project here under the current government.

They have zero business acumen and even less ethical values.

Investments here continue to drop, and that will likely be a continuing trend in the coming decade. Thailand is rapidly moving back towards 3rd world status, and it is likely the economy will shrink significantly, over the next decade or two. Thailand is being shunned. Manufacturing, investment, real estate and now tourism. Irrelevancy is one gift Prayuth and his highly toxic band of goons is giving to the nation.

[Saanim]

2 hours ago, webfact said:

Recently several Thai manufacturers have had to turn down desperately needed contracts from abroad, as not only are they suffering from labour shortages, but also cannot guarantee to make deliveries on schedule.

Most contracts with retailers do not include paying extra for price rises in shipping costs, leaving the Asian manufacturer to foot any increases alone.

That quite a strange assumption. Thai export prices are mostly FOB Bangkok, so the sea (or air) forwarding cost is covered by the buyer. 

If some companies grant their prices up to the buyer's port (CIF) they surely have made a clever clause to protect themselves. The problems of the forwarding East-West have not come over night. 

 

Whether "several Thai manufactures have had to turn down desperately needed contracts"?  If the goods are "desperately needed", it surely does not help to turn the contract down, just to wait few weeks more.  The figures of the Thai export have not shown any much such problems.  In contrary, many western buyers try to shift their buys from China to Thailand.  

 

  

 

[Longwood50]

1 hour ago, Tropicalevo said:

They have zero business acumen and even less ethical values.

That should not put Thailand at any sort of competitive disadvantage.  A person only has to look around the world at the other world leaders to see they also have zero business acumen and questionable ethical values. 

You have governments all run by people who for the most part have never worked a day in the private sector, never had to produce a product or service, never had to sell a product or service, never had to make a payroll yet somehow believing that by passing legislation, they know exactly how to run the economy. 

 

[Chelseafan]

3 hours ago, DaLa said:

I have been running my Export business for the last 10 years and was advised that there was a container shortage east to west and that a premium would need to be paid in order to secure a shipment. Now , you would have thought that as (supposedly) there were too many boxes in the west and they needed to get them back to the east to relieve the problem there would be reduced rates west to east so that they could achieve this.

 

No way, the rates west to east increased as well.  The problem with the logistics  business with regard to shipping is that you have very little options. You can plan ahead and agree a price with your customer at the end point and then the shipping companies can increase their prices with very little notice and you have no other options.

 

The problem you have highlighted is also exacerbated by new rules for container ships on emissions  that raised the prices by 10%.  Oh well I suppose the end customer will understand (not).  These additional costs are going in my t's and c's now. But the customer (wholesaler) knows I'm not sending the box back.

Absolutely. I was paying around $3500 per reefer container from Thailand to UK, its now around $20,000.. Not only that but duty increases too as its a %age of the cost of goods and freight. Inflation is going to be the biggest challenge in Europe over the next year or so. 

[Chelseafan]

3 hours ago, Isaanlife said:

1000's of containers on the ground in California.

 

No trucks to move the containers to all points across the USA.

More than that. Most of the west coast ports can't get the ships offloaded quick enough. Last I heard there was a 5 day delay with ships being anchored offshore 

Edited January 14, 2022 by Chelseafan

[Chelseafan]

1 hour ago, Saanim said:

That quite a strange assumption. Thai export prices are mostly FOB Bangkok, so the sea (or air) forwarding cost is covered by the buyer. 

If some companies grant their prices up to the buyer's port (CIF) they surely have made a clever clause to protect themselves. The problems of the forwarding East-West have not come over night. 

 

Whether "several Thai manufactures have had to turn down desperately needed contracts"?  If the goods are "desperately needed", it surely does not help to turn the contract down, just to wait few weeks more.  The figures of the Thai export have not shown any much such problems.  In contrary, many western buyers try to shift their buys from China to Thailand.  

 

  

 

Yep, most trade is FOB Thailand with payment in US dollars. 

[Chelseafan]

1 hour ago, Longwood50 said:

That should not put Thailand at any sort of competitive disadvantage.  A person only has to look around the world at the other world leaders to see they also have zero business acumen and questionable ethical values. 

You have governments all run by people who for the most part have never worked a day in the private sector, never had to produce a product or service, never had to sell a product or service, never had to make a payroll yet somehow believing that by passing legislation, they know exactly how to run the economy. 

 

The problem with Thailand isn't so much legislation as stability. Promises now may not be good on paper in 10 years time. My company (a major top 5 global retailer) won't invest in Thailand for that reason... Oh and they don't do business under the table... 

[hotchilli]

5 hours ago, Isaanlife said:

Building a new plant in Vietnam and not Thailand.

 

Imagine that!

Thailand only builds concrete boxes.

[RichardColeman]

2 hours ago, Chelseafan said:

The problem with Thailand isn't so much legislation as stability. Promises now may not be good on paper in 10 years time.

Going by the continuing thai pass test and go fiasco, you can reduce that 10 years to less than 10 days

[ukrules]

5 minutes ago, hotchilli said:

Thailand only builds concrete boxes.

Small concrete boxes

[hotchilli]

3 minutes ago, ukrules said:

Small concrete boxes

Small expensive concrete boxes.

[swm59nj]

The same issue is happening in different parts of the world.  But shipping issues cannot be compared with a serious medical crisis. 

[Farangdk]

The situation right now is unsustainable for most and it will not get any better this year. And it will never be the same as before Covid. Not only has the sea rates been skyrocketing and continuing to rise, also getting space on a vessel for some destinations is a joke. 

  

Why all this? They keep telling us it is because of shortage of container in Far East Asia and that most empty container is going to China. Also, then 10% of all container vessel has been docked since the start of last year and lot of vessels are cueing up due to lack of capacity at different ports.

 

This applies to everyone who get goods from Asia. Look at various stores in Europe and elsewhere. Only one to pay for this, is the consumer. These shipping companies act like mafia right now.

[Chelseafan]

13 minutes ago, Farangdk said:

 

The situation right now is unsustainable for most and it will not get any better this year. And it will never be the same as before Covid. Not only has the sea rates been skyrocketing and continuing to rise, also getting space on a vessel for some destinations is a joke. 

  

Why all this? They keep telling us it is because of shortage of container in Far East Asia and that most empty container is going to China. Also, then 10% of all container vessel has been docked since the start of last year and lot of vessels are cueing up due to lack of capacity at different ports.

 

This applies to everyone who get goods from Asia. Look at various stores in Europe and elsewhere. Only one to pay for this, is the consumer. These shipping companies act like mafia right now.

Hell yeah. Some ships can carry as many as 200,000 containers, average that out at $10k a pop... Well you do the maths. Shipping lines are coining it to the point that the money they are making is obscene. 

[KhunLA]

3 minutes ago, Chelseafan said:

Hell yeah. Some ships can carry as many as 200,000 containers, average that out at $10k a pop... Well you do the maths. Shipping lines are coining it to the point that the money they are making is obscene. 

They must be some pretty small containers.

 

24k is about the max, not 200k.

[Farangdk]

23 minutes ago, Chelseafan said:

Hell yeah. Some ships can carry as many as 200,000 containers, average that out at $10k a pop... Well you do the maths. Shipping lines are coining it to the point that the money they are making is obscene. 

I know the situation. We handle FCL and LCL shipments on a daily basis. I know they are make lot of money, that is why rate never will become the same again. Increase to some destinations are as high as 900%. Mostly is is between 300% and 500%. North America and Northern Europe/ UK are the worst when not comes to increase. The biggest container vessel has a capacity of 23,992 containers TEU.

[Longwood50]

5 hours ago, Chelseafan said:

The problem with Thailand isn't so much legislation as stability.

To be redundant, look at the remainder of the world.  Can you honestly say that the largest market in the world the USA has "stability"  Look at just the oil industry.  There was a shortage of oil yet one party wanted to keep a lid on it, Trump was elected and drilling resumed full speed ahead.  Biden is elected and pipeline projects that were approved get cancelled, and drilling is suspended on all federal lands. 

In terms of "bribes"  The USA and most other countries are just as guilty as Thailand but they are more sophisticated in how the bribe takes place.  You think that legislation in the USA that favors certain industries or specific companies is not done by lobbyists who have found a way to grease the skids. 

Look at Biden himself.  His son gets tens of thousands to serve on a board in Ukraine  Why?  Because of his extensive experience with gas and oil and Ukraine?  Hunter Biden could not even spell Ukraine let alone have enough knowledge of the oil and gas industry.  Biden's brother was part of a huge real estate development in Costa Rica but it needed electricity to make it possible.  Now just what Vice President charged with overseeing the Caribbean shepherded funding for an electric project using U.S. dollars that brought the required electricity to that region. 

If favoritism, nepotism, and financial coercion had to be eliminated in order to do business with a specific country, your company would be limited to a lemonade stand on the corner. 

[Saanim]

5 hours ago, Chelseafan said:

The problem with Thailand isn't so much legislation as stability. Promises now may not be good on paper in 10 years time. My company (a major top 5 global retailer) won't invest in Thailand for that reason... Oh and they don't do business under the table... 

Perhaps there are some special reasons some big buyers have for their decisions where to buy from.  At a usual SME the govt has nothing to do with purchase orders.  And actually does not care. All is up to the marketing of the exporter and his agreement with the buyer.  Govt does not know anything about it and surely cannot influence it in minus or plus.

 

  

[Saanim]

2 hours ago, Farangdk said:

Why all this? They keep telling us it is because of shortage of container in Far East Asia and that most empty container is going to China. Also, then 10% of all container vessel has been docked since the start of last year and lot of vessels are cueing up due to lack of capacity at different ports.

 

Currently, there have been 100 container ships off shore Los Angeles awaiting permission to dock.

https://www.nbcnews.com/business/100-ships-idle-offshore-california-communities-see-rise-toxic-pollutan-rcna3984

As 100 ships idle offshore, California communities see rise in toxic pollutants

As 100 ships idle offshore, California communities see rise in toxic pollutants

[unblocktheplanet]

Hasn't Phra Yut tied up all the containers in front of his house & around the Grand Palace?

[Graemej100]

Does this reporter seriously suggest that the lack of goods on supermarket shelves is a greater issue than Covid?

Wow.