How Bad Inflation Might Get, According To The Companies That Will Raise Prices

CEO of office-furniture company Branch, can only fit so many desks and chairs into a shipping container. Even the consultants he’s hired to shrink packaging by an inch here and an inch there say they’ve done all they can. So, with shipping rates to the U.S. from his factories in China still stuck at stubbornly high rates a year after they first shot up, Hayes has reluctantly raised prices for customers by about 20%.

The global supply-chain mess, prompted by a surge in consumer demand at a time when factories and logistics companies were hobbled by coronavirus-related lockdowns, is not over, with many companies now saying their main struggle is paying sky-high shipping rates and a list of fees for goods delayed at the nation’s slammed ports. The higher costs have trickled down to consumers in recent months, helping push inflation to 40-year highs.

That has translated into boom times for shipping companies, which raked in record profits last year. Maersk, one of the world’s largest shippers, said profits exploded to $18 billion last year, six times the prior year, on the back of higher rates. Maersk faced some higher costs itself, but gross margins still hit 32%, triple the previous year.

It’s not just shipping rates. Companies have faced other climbing expenses, too, like port fees. These are incurred when their containers sit at the docks for days or weeks, even if they are helpless to move them due to the congestion and chaos. In an effort to incentivize companies to move their goods faster and make room for incoming shipments, several U.S. ports have announced increased fees in recent months for containers that overstay their welcome.

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How Bad Inflation Might Get, According To The Companies That Will Raise PricesIt’s still much more expensive to get stuff to the U.S. from Asia a year after shipping costs first shot up.
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