Global pandemic has been here for more than a year now. Many aspects of our life has been altered, including in business. People doing the wood industry deals with a lot of shipping, domestically or multinational. And those people know exactly that now the freight has soared 300% in average, giving all but uncertainty in taking orders.
The model for timber orders vary, with some countries will bear the shipping fees, while some others will include in sellers price. Some countries can afford to increase the selling price due to the increase, but some just cant. Each country now also have to consider the opponents geographical advantage, for example rather than buying from Indonesia, why not buy from neighbours in South America. Each player now knows that freight is no longer a small factor, in fact now it can cancel and delay shipments based on the floating price alone.
Take shipments from Indonesia to Boston, USA, for example. One 40ft container at the time this piece is written, as far as the writer understands, will cost you approximately $20,000 from port to port. Pre-pandemic prices is around $3000-$4000 / container, and to give perspective, the value of timber in one is roughly $40,000. Which if you calculate will result in a thumping 33,33% cost component from ocean freight. Scary.
Suppliers become uncertain and worried to produce, as their cashflow will deter if orders get delayed and cancelled, on the other hand, buyers, who are mostly traders, also become wary of the situtation. This has to be sorted out sooner than later, since it is starting to grow and disrupting the economic growth that the world needs so badly after the pandemic.
So why is the international freight so high right now?
As far as the writer reads, there are plenty of factors. The pandemic creating unstable supply and demand between countries. China-America trade wars, resulting in unbalanced containers going in and out of each country. And so on.
But is this true? If it is, isnt the world filled with super-smart, harvard-degreed people who for sure could've prevented this by now? Or at least minimized the impact? This freight debacle has been on-going for around 9 months now, from the fourth quarter of last year, and we are seeing no measures taken yet.
If you have a different opinion please do enlighten the humble writer or the others. Ciao.
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