The Lingering Cost of COVID-19
No Safe Harbor from Problems in Overseas and Domestic Shipping
Previous and this page: photo by Andrey Sharpilo on Unsplash
By K. Schipper
One thing about the COVID-19 era: It’s unpredictable. After fears of a total shutdown early last year, many U.S. shops quickly found business booming as families stuck at home opted to invest in remodeling kitchens and bathrooms. There’s still no shortage of customers in 2021 … but materials are now another matter. Whether it’s quartz from Korea or marble from Italy, hard surfaces are just a few of the myriad products where normal worldwide shipping isn’t normal. A slow flow of sea traffic and a massive shortage of containers are driving delivery costs up. And, while importers say they’ve been absorbing most of the increase in shipping to this point, that can’t go on indefinitely.
“We already have a three-month lag time that we have to anticipate. That has created a bit of a supply -and-demand issue.”
Evan Cohen Quality Marble and Granite
Just how bad the current situation is depends on who you talk with and where they’re importing from. In most cases, though, the numbers are staggering. Out on the West Coast, Evan Cohen of Ontario, Calif.-based Quality Marble and Granite, says at one point he could bring in a container from China for as little as $900. As of early May, that was at $3,600 and climbing. “From Brazil we’re also starting to see some increases,” Cohen says. “We were around $2,500 a container, and we’re gearing up towards $3,800-$4,000. That’s just the cost of shipping.” Across the country in Westwood, Mass., Gian Luca Fiori of Marble and Granite Inc., says his latest shipments from Brazil have been in the $3,500-$3,700 range. “Most of the material we bring in is 3cm,” Fiori says. “That’s about 2,400 ft² per container. What used to be about $1 per ft² is now $3 ft².” However, those numbers pale when compared with a recent quote he had from Korea where the cost had risen to $14,000 per container. “That’s a huge increase, and it tends to affect the lower-end materials more,” he says. “When you’re buying a material that’s $7 per ft² and you add $5 per ft² to the shipping, it’s a different proposition than if you’re buying a material that’s $20 a ft² and you add that $5.” Amit Gupta, president and CEO of TAB/Amsun & Ash which operates in both the United States and India, comes at the problem from a different perspective as head of a company trying to export to the U.S. Still, he calls the situation “unprecedented.” “Our revenues are less because we just can’t find enough containers,” Gupta says. “It’s a daily grind and it’s constant. We have vessels skipping ports, vessels not coming, vessels that are already full, or no vessels.” He notes that India faces an additional problem because India has decided to ban Chinese imports, limiting vessels and containers. Cohen describes the situation as “a logistics nightmare.” He dates the start of problems back to the early days of the pandemic, when shippers started parking some vessels, expecting a repeat of the 2008 recession. After a couple months, however, product demand increased dramatically. “The factories started getting back orders that people had been hesitant to place,” he says. “And, unfortunately for our industry, we already have a three-month lag time that we have to anticipate. That has created a bit of a supply -and-demand issue.” Fiori agrees that the problem probably started back when the pandemic was just cranking up and some ports were shut down. Once the demand began to increase, there wasn’t the shipping to handle it. “There’s been a vacuum of transportation that has not caught up yet,” Fiori says. “Plus, people like Walmart and Nike are already agreeing to pay much higher amounts per container, and someone like Walmart can give them a full ship of containers, so there’s no space for us.” On top of that, he adds stone is heavy, meaning it takes more diesel fuel to get to this country.
“It’s a daily grind and it’s constant. We have vessels skipping ports, vessels not coming, vessels that are already full, or no vessels.”
Amit Gupta TAB/Amsun & Ash
“We’re importing so much, and the containers aren’t going back to places where they need to be, like India and Korea.”
Gian Luca Fiori Marble & Granite Inc.
A Universal Issue
Just as the pandemic has sickened people around the globe, Jonathan Mitnick of CCS Stone in Moonachie, N.J., says the transportation problem is universal. “People talk about China, but it’s the same for goods coming out of Europe,” Mitnick says. “I recently had a call from a large slate supplier in the United States who asked me if I had a particular slate from Spain. He had an order in place, but he couldn’t get it out even though it was in containers and waiting at the port.” In this case, Mitnick says the silver lining is he was able to help his competitor and move some inventory, but that doesn’t always happen. He says importers and even fabricators may have to focus on purchasing what’s available or turning to more industry-standard materials. “Don’t rely on special orders,” he cautions. “There are always people willing to wait but depending on the country of origin and the product, it’s not unusual to have an eight-to-12-week cycle, maybe longer. Now that cycle is not reliable.” Still another option, both Mitnick and Quality Marble’s Cohen say, is to turn to products produced closer to home. “It gives us a little more energy to look towards domestic sources,” says Mitnick. “It might be a good thing for the U.S. economy, or rather North America, especially Canada, but maybe even Mexico.” “The days of having what you want in stock when you want it is not always going to be the case moving forward here,” says Cohen. “With unforeseen amounts of time to get products from offshore producers, it’s a little easier to manage products that are made in the U.S.” Even where ships are available, there’s no guarantee that the containers in which products ship will be where they need to be. The two matters aren’t strictly tied together. Marble and Granite’s Fiori says some of it stems from the lack of a balance of trade between the U.S. and other countries. Not surprisingly, there’s a lot of focus on the routes with the greatest demand, mainly between the U.S. and Asia. “We’re importing so much, and the containers aren’t going back to places where they need to be, like India and Korea,” Fiori says. “There is actually a shortage of containers in some of those places.” Kevin Wells, the supply chain manager for Quality Marble, echoes that. “If you have a container sitting at the port, but China’s not buying something to send that container back to China, then they’re not going to have a container there,” Wells says. “China has a shortage of containers and we have all the containers here.” Mitnick says adding salt to the China wound is the higher costs from tariffs imposed by the Trump administration. He calls them “a double whammy” and “a real test for our customers,” not to mention another impediment to getting containers back across the Pacific. If there’s some good news to this aspect of the issue, Fiori says he’s read that Triton International, the world’s largest lessor of intermodal containers, is investing more than $2.5 billion on additional stock. However, he adds that it’s a solution that isn’t going to be available immediately.
"It gives us a little more energy to look towards domestic sources. It might be a good thing for the U.S. economy, or rather North America, especially Canada, but maybe even Mexico." Jonathan Mitnick CCS Stone
"We moved up the opening of our new fulfillment center in Utah to April to mitigate lead-time concerns." Rick Stimac BB Industries
Of course, natural stone isn’t the only product used by the hard-surfaces industry, and problems don’t necessarily evaporate once one of those elusive containers hits this country’s shores. While the cost of stone seems to be holding steady for the moment, it’s looking like quartz surfaces may be running into an issue with one of its components. “We’ve heard that the price of oil is affecting the cost of resin for the quartz suppliers,” says Fiori. In general, though, it’s unlikely the cost and availability of petroleum products will have much impact, despite concerns that a shortage of qualified tanker drivers may make it difficult to keep service stations topped off as the summer wears on. “India is currently experiencing the highest fuel prices domestically ever in its history,” says Gupta. “But globally crude oil is moderate, so I don’t believe global shipping has anything to do with the cost of fuel.” Still, shipping in this country is seeing some impacts from the pandemic. Gupta says he’s seen his shipping costs within the U.S. increase anywhere from 50% to 150%. Rick Stimac, president and CEO of Knoxville, Tenn.-based BB Industries, says while the delays in containers getting into U.S. ports has hurt the company’s supply chain, it’s also seen about a 10% increase in domestic freight costs since last fall. “We’ve been experiencing five-to-seven-day delays from East to West due to driver shortages and constant delays from depots to the next location,” Stimac says. “Due to these circumstances, we moved up the opening of our new fulfillment center in Utah to April to mitigate lead time concerns.” For Quality Marble’s Cohen, the distance is much shorter. It’s less than an hour from the Port of Long Beach [California] to his base in Ontario, but he’s seen his transportation costs across that distance almost triple. “We’ve seen it go from about $600 per truck to $1,600 per truck,” he says. “We were paying closer to $2,000 a truck, but with some negotiation we were able to knock it down to $1,600.” On the East Coast, both Fiori and CCS Stone’s Mitnick say they’ve seen a shortage of trucks, both to haul containers to their warehouses and then send orders back out again out to their customers. “Instead of getting one right away, it might take me a few days,” says Mitnick. “Still, it’s nothing compared to the degree we’re seeing on the ocean freight.” However, that’s one small piece of a much-larger shipping puzzle that no one expects to solve itself soon. An optimist, Mitnick says he hopes to see at least some stability in rates over the next three to six months. However, both Cohen and Fiori believe because it’s a worldwide issue whose resolution will also be impacted by such things as inflation, monetary supply, consumer confidence and trade policy between governments. It’s going to take awhile. “It needs to be sorted out, but that’s going to take time,” says Fiori. “I don’t think this is going to be corrected by this summer; it’s a problem that we may see improving next summer.” Gupta agrees that people need to consider the long haul because it’s not likely to resolve itself any time soon and will continue to worsen before it starts to improve. “Despite all-time highs, the best time to book shipments is today,” he concludes. “Tomorrow will even be more costly.”