Jack Rimer has successfully run a small business making model amusement rides in Virginia for three decades, but the global supply chain snafu is throwing a wrench in it.
Working with a small team of 14, he imports plastic injection parts and lithium batteries from China and specialty wood from Russia-- all assembled in Elkton, Va.-- to make model Ferris wheels, roller coasters and souvenirs that are sold in toy stores and amusement parks.
Lately, the cost of shipping has soared, following a global trend. He must pay $26,000 for a single ocean-bound 40-foot shipping container, up from $7,000 a year ago. A single sheet of 5x5-foot wood from Russia now costs $33, up from $6.
“I can’t simply charge my customers five times more for my product and expect to stay in business,” said Rimer, owner of CoasterDynamix, one of three businesses he founded. “Perhaps if I provided a good or service that was a necessity, I could get away with an increase.”
He’s visibly tired of hearing everything blamed on Covid. “Someone, somewhere is trying to make up for lost revenue during Covid,” he said. “It is so easy to raise prices on a necessity like shipping and cry ‘Covid!’ It’s like when the Exxon Valdez ran aground and oil prices doubled. However, these absurd money grabs will ultimately sink this economy. No one can sustain [it]…Somebody is profiting big time from this global tragedy.”
The story of supply chain delays and price increases relates a tiny bit to the chip shortage felt especially by the auto industry. However, chips shortages are not the reason that dozens of huge container ships are lined up outside of major ports like the one near Los Angeles.
Port authorities blame multiple factors, including a shortage of truck drivers to remove containers from ports and carry them to their destinations. The wood Rimer orders is arriving by air freight from Russia. It is a special birch that is one-eighth of an inch thick and easily cut with lasers at the assembly facility in Virginia. Rimer said Covid’s impact in Russia reduced the number of workers processing the wood, one possible reason behind the price hike.
Rimer normally orders one or two shipping containers from China a year, and this year tried to get one starting in July. After finally getting one, it still had not arrived in late October and could face delays off the port in Norfolk, Virginia. In addition, it is subject to further delay due to a U.S. Customs inspection.
To have a shipping container allocated for his business, he had to make a special $1,000 payment to a provider in China that he described as a “bribe.” Recently, he was told he faces an added “congestion fee” of $1,125 for the container, a cost imposed by the U.S.
“Evidently, it is somehow my fault that they cannot unload containers fast enough and it is causing congestion at the ports,” he said. “Unreal.”
Rimer doesn’t believe it is realistic to separate the U.S. from trade with countries such as China or Russia. At least for now, shipping from distant lands remains a necessity.
Some experts think delays in receiving shipments to the U.S. by container ship could last well into 2022 or even 2023. Hapag-Lloyd’s website described recent delays at various ports running as high as 13 days for “dwell times” at specific terminals. Dwell time or the length of an ocean voyage doesn’t completely account for increased costs, however.
The broader concerns about global supply chain prices and delays are studied by economists, including Tyler Cowen, a professor of economics at George Mason University. “The world’s supply chain problems are more persistent and more severe than previously realized,” he wrote in an opinion piece in Bloomberg. “There is no single reason why and therefore no straightforward fix… No one really knows when the situation will improve.”
Rimer remains optimistic. “We are holding out hope that the prices decline after the holidays,” he said. “However, we have a pricing contingency plan for next year if they don’t. We will have to raise prices if things don’t change.”
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