What’s Up with the Supply Chain.

 By Arlette Farland

If you're in the signage and/or print industry, or any industry for that matter, and are frustrated by rising costs and a lack of supply on some products, here are a few reasons why...

As an importer and distributor, we are at the mercy of overseas raw materials and shipping. Prices for both of these are currently driving upwards due to raw material shortages and fierce competition for ocean freight; with a shortage of 20-foot containers and vessels, demand is outstripping supply.

What does this mean? Container costs have increased signficantly, and raw material shortages have seen at least two price increases from most suppliers so far in 2021 (unheard of) of up to 10% (also unheard of) or more.

Here are a few reasons why we have entered the perfect storm...

The Texas Freeze

In March 2021, a huge power outage brought the world’s largest petrochemical complex to a stop. As a result, prices for polyethylene, polypropylene and other chemical compounds used to make auto parts, computers and many other plastic products have reached their highest levels in years. For example, prices for PVC, have more than doubled since last year (according to S&P Global Platts). Raw material shortages are real and are resulting in a doubling of lead times from factories. This stems from these factories that make the resin thermoplastics essential to a vast array of products, including vinyl films.

Lockdowns and Unlockdowns

With some countries back to normal or greater on their overseas exports, others are shipping less. This imbalance in recovery has lead to an imbalance in global trade. That means not only delayed production due to Covid outbreaks but also displaced empty containers. How do you ship goods if you can't get your hands on a container? What's more, sailings have been reduced as demand for freight has increased. Many shipping lines from China are cutting back their services to New Zealand as USA routes are more profitable. Word is American customers are paying $10K for a container space (the normal day price is about $3-4K), so shippers from Asia are putting all their resources into more lucrative lines. We recently had an ETA of August 31 delayed a month because we could not find a ship to sail on. In addition, ports will close down if there is a Covid outbreak which was the case with a critical Chinese port in Yantian in June = delays delays delays.

Port Congestion and Lack of Crane Operators

Ports of Auckland has been an absolute shocker this year (and in 2020, too) as they don’t have enough crane drivers. Hence, they cannot work at full capacity, and ships are languishing in the harbour or rerouted to Tauranga. This means having to then have the added cost of transporting our goods to Auckland via truck or rail. They recently paused their controversial automation system over safety concerns, but can they gear up their manual operation in time for the Christmas rush as business owners start gearing up? Hmmm, with a lack of qualified crane operators in this country and immigration woes due to Covid, I doubt it.

So in conclusion the two key drivers are a doubling in the cost of the raw materials that go into making PVC and a significant increase in the cost to ship goods.

Final Note

With four significant warehouse locations nationwide, Computaleta actually hold a lot of stock. We are very well positioned as we have placed orders three months in advance for most of 2021. But shortages on some lines are almost a guarantee across the whole industry.  Not only that, brace yourselves and don’t be surprused  price rises across the whole industry. I only hope this helps you understand why, and what is really going on out there.