LOW interest rates coupled with the congestion at US west coast ports have allowed importers to take advantage of the situation by using containerships as 'offshore warehouses" to mitigate logistics costs.
According to freight visibility company project44, transit times from China to Los Angeles have nearly tripled, with freight taking up to 60 days to be cleared through LA and Long Beach ports - its data suggests an average of 540,255 TEU per month was waiting to berth at LA, reports UK's The Loadstar.
Figures from p44 and HSBC estimate the average value of a container load at US$40,000, with an average cost of financing of 3.2 per cent, generating an extra $321 million in interest between January and November 2021, says p44, adding this is "a small fraction of the total cost of goods".
It said: "With interest rates at historic lows, companies could finance a surplus amount of inventory and essentially store it at sea for two months. While this might not be entirely deliberate, the congestion helped companies circumvent storage costs on the excess inventories.
"Though shippers paid interest-related penalties on freight stranded at sea, the costs were diminutive compared with storing that inventory on land (warehousing prices are high, while availability is scarce)."
While overall costs have increased, the pre-pandemic transit times from Chinese ports to Los Angeles was 16 days, with another six for clearance, said p44, using data from Shifl and the port of LA.
Meanwhile, project44 announced it had received investment of $420 million from a syndicate led by US private equity specialist Thoma Bravo. This followed the $202 million in equity p44 raised in last May and brings the company's total valuation to $2.2 billion.
Robert Sayle, partner at Thoma Bravo, said: "Supply chain visibility has become increasingly important as shortages, delays and bottlenecks ramp up project44's potential to solve even the most complex of these issues is unparalleled."
Email | Print