Don't the contracts include provisions for surcharges? Unforseen circumstances, fuel cost hikes,...things of that nature?
There are two forms of rate structures - contract and spot market. Those that ship under contract rates have a known cost for the period of the contract. The Spot Market is buyer beware as the rates are whatever the traffic will bear. Occasional shippers are the ones that are captive of the Spot Market.
Never too old to have a happy childhood!
Euclid Convicted One Euclid I don't believe container shipment has inflated over the norm by ten times. I thought Murphy Siding said the cost to send a container full of doors across the ocean went up to like $20,000 from previously $1,500-$2,000? I didn't write the figure down at the time, but that's about what I thought he was saying, so when Midland Mike made a similar claim, it appeared to "track" with what I thought others were claiming. I have seen that claim reported in many different sources. It may or may not be true. I have no way to verify it to be true or false. But I choose to have the opinion that it is not true. Others are welcome to believe whatever they want, but until they prove it, it is only an opinion. To me, it seems improbable because it is a 1000% price increase seemingly within a very short period of time. That does not make sense to me. I understand that a 1000% increase on shipping price does not mean there will be a 1000% increase on product price to cover the shipping increase. But shipping is likely to be a very large component of product cost, and a 1000% increase in shipping seems like it would trigger massive public reaction in the business community as well as the consumer market for the goods affected. The lack of that reaction makes me suspicious of the claim. Also, it does not make sense that the shipping industry would suddenly launch a 1000% price increase. Typically a business that contemplates a price increase does not want to draw unnecessary attention to it, so they move forward with measure and restraint. And even in cases where a significant increase is needed because of inflation, companies are careful to move in moderation and offer clear explanations that the cause is something they have no control over. So they strive to stay in the favor of their customers despite the hardship their cost increase will have on the customers.
Convicted One Euclid I don't believe container shipment has inflated over the norm by ten times. I thought Murphy Siding said the cost to send a container full of doors across the ocean went up to like $20,000 from previously $1,500-$2,000? I didn't write the figure down at the time, but that's about what I thought he was saying, so when Midland Mike made a similar claim, it appeared to "track" with what I thought others were claiming.
Euclid I don't believe container shipment has inflated over the norm by ten times.
I thought Murphy Siding said the cost to send a container full of doors across the ocean went up to like $20,000 from previously $1,500-$2,000? I didn't write the figure down at the time, but that's about what I thought he was saying, so when Midland Mike made a similar claim, it appeared to "track" with what I thought others were claiming.
Also, it does not make sense that the shipping industry would suddenly launch a 1000% price increase. Typically a business that contemplates a price increase does not want to draw unnecessary attention to it, so they move forward with measure and restraint. And even in cases where a significant increase is needed because of inflation, companies are careful to move in moderation and offer clear explanations that the cause is something they have no control over. So they strive to stay in the favor of their customers despite the hardship their cost increase will have on the customers.
The rise in shipping costs were statistics compiled by tracking companies which shippers pay to make informed decisions. The figures were also quoted by shippers who had to pay the rates that jumped an order of magnitude. These are not opinions but facts. You can dispute facts if you find conflicting facts, but you can't dispute them merely with uninformed opinion.
Also, if you tuned into any mainstream news, you would see that there has been massive reaction by the businesses that are affected by this. You would also find out that those businesses report that shipping costs will have varying, but sometimes much smaller effects on final sale price.
BaltACD how does the increased transporation costs affect the price of the individual door. How many door are in a box?
We actually had that conversation, because I had the same curiousity as you had. I believe he said 900 doors per container.
So, on the one hand, the increase per unit isn't astronomical. But, at the same time that's $18,000 out of someone's margin, unless they pass it along.
I wouldn't be shocked if the increase cost per unit was roughly equivalent to the cost savings of off shoring vs buying from a domestic source (in the prior "normal" market).
But there I go again..where is my tin foil hat? (we need a "tin foil hat" smilie)
So - if the price of a box went fron $2K to $20K - how does the increased transporation costs affect the price of the individual door. How many door are in a box? 100? 1000?
Is Murphy going to increase his selling price to 10 times the old price based only on transportation costs?
EuclidI don't believe container shipment has inflated over the norm by ten times.
tree68A balance between what it costs the seller (including cost of goods sold and some form of profit) and what the buyer is willing to pay.
Of course you realize the seller is under no form of "duty" to pass his cost savings along to the consumer? That's what these importers consider to be their "reward" for being enterprising enough to become "global" in their thinking.
When GE moved it's production of refrigerators to Mexico, the prices it charged did not go down to reward the consumers with labor savings. The consequent broader margin was passed along to the stockholders as their reward for hiring astute management.
So, most businesses will charge whatever they can get away with, irrespective of production cost. I believe the actual principle at work is called "the dollar left on the table" or very similar.
Now, all those clever dawgs are paying their dues to that "global" mentality, while other members of that chain leverage their positions. "Dawg eat Dawg", etc.
BaltACDPenny? Penny? Penny? I don't think petroleum pricing even acknowledges the penny as a unit of measure - everything seems to move up or down by a nickle or dime or more - of course the 9/10ths is hard wired.
As I recall, this was an attempt by a local dealer - and dates back to dollar or so gas.
The point at the time was that said station operator was going to get X cents of every gallon sold, and not a red cent more. Had he raised the price by a nickel, his cost would go up by a nickel as well...
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
tree68These days, though, the point-of-sale terminals/pumps are usually tied into the "mother ship," and their supplier simply raised the cost to the station by a penny.
Penny? Penny? Penny?
I don't think petroleum pricing even acknowledges the penny as a unit of measure - everything seems to move up or down by a nickle or dime or more - of course the 9/10ths is hard wired.
blue streak 1Sometimes by the manufacturer. Still see a few item with boxes priced.
The principle is the same. Some people will pay $9.99 for a box of Christmas cards. Some won't pay more than $1.99. There's a product for each. If all were $9.99, some might still buy, others would send nice hand-written notes instead.
I once heard of a gas station that thought they could increase their profit at the station level by increasing the price of gas by a penny a gallon.
These days, though, the point-of-sale terminals/pumps are usually tied into the "mother ship," and their supplier simply raised the cost to the station by a penny.
Euclid How should the price be determined if not by the seller?
How should the price be determined if not by the seller?
A balance between what it costs the seller (including cost of goods sold and some form of profit) and what the buyer is willing to pay. That's how it's worked in the past.
It can be a delicate balance. You, as the seller, can certainly set your price wherever you want. But you have to hope that the buyer values your product enough to pay what you are asking.
The problem can be if the product is a "necessary," like, say, gasoline. Some buyers will pay whatever price is asked because they need the product. Of course, that may now become part of the cost of goods sold for whatever they are selling, and so the circle begins...
tree68 Electroliner 1935 How do the suppliers justify these increases? When the oil platform burned in the Gulf, local gas stations quickly raised their prices (especially some of the larger chains). In part, that's justified, I guess. I've been told that your price at the pump reflects their next load, not the last one. OTOH, several were prosecuted for price gouging... Bottom line is that they'll charge what the market will bear.
Electroliner 1935 How do the suppliers justify these increases?
When the oil platform burned in the Gulf, local gas stations quickly raised their prices (especially some of the larger chains).
In part, that's justified, I guess. I've been told that your price at the pump reflects their next load, not the last one.
OTOH, several were prosecuted for price gouging...
Bottom line is that they'll charge what the market will bear.
At one time gas/oil prices were dependent on the tank truck delivered price. Once OPEC started the gas crisises in the middle 1970's that form of pricing began to change. Now a days consumer level pricing is dependent on what new stories are hitting the local media - the stories don't even have to have any basis in fact for either supply or demand - they just have SEEM like they might have some effect. On top of that you now have petroleum refineries jacking their prices up because they need to perform routine maintenance of their plants - maintenance they have been planning for multiple years - and if they are anywhere near as professional in their business as they want us to believe - maintenance gets done with minimal if any restriction on total throughput of the facility over time.
Gouge them for every cent possible!
Electroliner 1935How do the suppliers justify these increases?
Electroliner 1935 How do the suppliers justify these increases? Yes, all things are increasing in price, but not 50% higher. Labor is not going up 50%, trucking is going up. But by 50%? Feedstock such as natural gas or petroleum, has already dropped back from it highs. I think some companies are testing their markets to see if they can get higher prices than they actually need. If I know farmers, many will find ways to avoid the excessive prices and/or do their price/cost analysis and we will see them say #%@@# and we will see food shoertages.
How do the suppliers justify these increases? Yes, all things are increasing in price, but not 50% higher. Labor is not going up 50%, trucking is going up. But by 50%? Feedstock such as natural gas or petroleum, has already dropped back from it highs. I think some companies are testing their markets to see if they can get higher prices than they actually need. If I know farmers, many will find ways to avoid the excessive prices and/or do their price/cost analysis and we will see them say #%@@# and we will see food shoertages.
Whether or not companies need a price increase is irrelevant.
[quote user="Shadow the Cats owner"]Fertilizers are up over 100 percent from last year. /quote]
Yes, the prices have gone up a lot year to year, but not over 100%.
(From a recently researched article)
In the breadth of a year, anhydrous ammonia increased by 53%, $487 per ton in 2020 to $746 per ton in 2021; DAP increased by 83%, $390 per ton in 2020 to $717 per ton in 2021, which is its highest price since 2008; and potash increased by 71%, $350 per ton in 2020 to $600 per ton in 2021 (Schnitkey et al., 2021, pp.2-3)
Words
... ..........
We are just starting to see the inflation begining. Why farmers are buying next YEARS crop inputs things like fertilizer seeds pesticides herbicides and other things needed to grow the food we need. My hubby has a family of farmers and all of them are saying to even grow crops next year is going to cost farmers between 80 to 90 percent MORE per acre than this year just for the needed stuff to grow the crops. Fertilizers are up over 100 percent from last year. Some fertilizers needed for wheat are going for over 100 a ton right now. Even generic Roundup is up by 80% over last years pricing. Farmers do not have to sell their crops right away if they have the storage space to hold it just remember that.
BaltACDthe price of the commodity will increase geometrically in a relative square
Doubtful
https://research.stlouisfed.org/publications/economic-synopses/2021/09/08/the-link-between-higher-commodity-prices-and-inflation
MidlandMike Euclid I don't believe container shipment has inflated over the norm by ten times. I have heard that, but where is the proof? Without proof, it is just one more sensational comment. The statement is also too pat and general to be convincing. And-- if it were true, it would be being paid by somebody and ultimately passed to the consumer. If the consumers were actually paying that increase, would there not be lots of news about how the price of imports have skyrocketed? Instead, we hear about the price of butter and eggs going up. My recent post contained a link to an article showing stastics from a shipping rate tracking company that show a ten fold increse. You are free to show statistics that disprove it. The costs of shipping is only one of the factors in pricing, and does not translate directly to the ultimate price. The price of many things produced in the US can be affected by the cost of imported components, like chips in autos. Even products totally produced in the US, like gasoline, depend on world oil prices.
Euclid I don't believe container shipment has inflated over the norm by ten times. I have heard that, but where is the proof? Without proof, it is just one more sensational comment. The statement is also too pat and general to be convincing. And-- if it were true, it would be being paid by somebody and ultimately passed to the consumer. If the consumers were actually paying that increase, would there not be lots of news about how the price of imports have skyrocketed? Instead, we hear about the price of butter and eggs going up.
My recent post contained a link to an article showing stastics from a shipping rate tracking company that show a ten fold increse. You are free to show statistics that disprove it. The costs of shipping is only one of the factors in pricing, and does not translate directly to the ultimate price. The price of many things produced in the US can be affected by the cost of imported components, like chips in autos. Even products totally produced in the US, like gasoline, depend on world oil prices.
When there are real chronic shortages of a commodity - be that oil, paper, transportation or any other commodity - the price of the commodity will increase geometrically in a relative square of the amount of the shortage.
Trans-Pacific container shipping gets hit on multiple levels of the pricing algorithm as the price ends up including the box, drayage fron the shipper to the origin terminal, the origin terminal costs, the shipping costs of the vessel, the destination terminal costs and the drayage costs to the ultimate destination.
EuclidI don't believe container shipment has inflated over the norm by ten times. I have heard that, but where is the proof? Without proof, it is just one more sensational comment. The statement is also too pat and general to be convincing. And-- if it were true, it would be being paid by somebody and ultimately passed to the consumer. If the consumers were actually paying that increase, would there not be lots of news about how the price of imports have skyrocketed? Instead, we hear about the price of butter and eggs going up.
BaltACD Euclid Convicted One Euclid I am no longer convinced that there is a problem. Ships are waiting to dock at the ports. So what? Maybe that is just the way it is expected to work, Well, if the cost to transport a container across the ocean remains inflated by 10 fold over the norm up to this point,...it's sure to be a problem for some... I tend to see things from a unique perspective. When I buy long-shelf-life food items, I always hope that they were not made in some foreign sweatshop where quality control is even less regulated than we have here. So, hopefully increased transoceanic chipping cost will reduce that likelihood. I agree with you about anti-conspiracy nuts. It's just a veiled way to insult their ideological adversaries I don't believe container shipment has inflated over the norm by ten times. I have heard that, but where is the proof? Without proof, it is just one more sensational comment. The statement is also too pat and general to be convincing. And-- if it were true, it would be being paid by somebody and ultimately passed to the consumer. If the consumers were actually paying that increase, would there not be lots of news about how the price of imports have skyrocketed? Instead, we hear about the price of butter and eggs going up. I think that if ocean shipping prices were up 1000% consumers would have stopped buying imported goods. And there would a sudden surge of U.S. startup companies to produce goods that do not require an exotic, overpriced supply chain. Just lately shipping companies have been bragging about how much they have bought rates down due to the gains in efficiency by the use of ever larger ships. You aren't understanding what happens when demand exceeds the capacity to handle it. Once capacity is maxed, EVERYTHING starts backing up. One vessel delayed by capacity in docking now has that terminal 8K to 20K boxes behind, the second vessel that is delayed now has the terminal 28K to 40K boxes behind and so on. To get ahead, the terminal has to figure out some way to hanlde 8K to 20K more boxes in the same period of time. If the throughput of the terminal is at its maximum capacity - they AREN'T going to get caught up. At some point in time demand for the capacity will wane and then the terminal will start to get caught up.
Euclid Convicted One Euclid I am no longer convinced that there is a problem. Ships are waiting to dock at the ports. So what? Maybe that is just the way it is expected to work, Well, if the cost to transport a container across the ocean remains inflated by 10 fold over the norm up to this point,...it's sure to be a problem for some... I tend to see things from a unique perspective. When I buy long-shelf-life food items, I always hope that they were not made in some foreign sweatshop where quality control is even less regulated than we have here. So, hopefully increased transoceanic chipping cost will reduce that likelihood. I agree with you about anti-conspiracy nuts. It's just a veiled way to insult their ideological adversaries I don't believe container shipment has inflated over the norm by ten times. I have heard that, but where is the proof? Without proof, it is just one more sensational comment. The statement is also too pat and general to be convincing. And-- if it were true, it would be being paid by somebody and ultimately passed to the consumer. If the consumers were actually paying that increase, would there not be lots of news about how the price of imports have skyrocketed? Instead, we hear about the price of butter and eggs going up. I think that if ocean shipping prices were up 1000% consumers would have stopped buying imported goods. And there would a sudden surge of U.S. startup companies to produce goods that do not require an exotic, overpriced supply chain. Just lately shipping companies have been bragging about how much they have bought rates down due to the gains in efficiency by the use of ever larger ships.
Convicted One Euclid I am no longer convinced that there is a problem. Ships are waiting to dock at the ports. So what? Maybe that is just the way it is expected to work, Well, if the cost to transport a container across the ocean remains inflated by 10 fold over the norm up to this point,...it's sure to be a problem for some... I tend to see things from a unique perspective. When I buy long-shelf-life food items, I always hope that they were not made in some foreign sweatshop where quality control is even less regulated than we have here. So, hopefully increased transoceanic chipping cost will reduce that likelihood. I agree with you about anti-conspiracy nuts. It's just a veiled way to insult their ideological adversaries
Euclid I am no longer convinced that there is a problem. Ships are waiting to dock at the ports. So what? Maybe that is just the way it is expected to work,
Well, if the cost to transport a container across the ocean remains inflated by 10 fold over the norm up to this point,...it's sure to be a problem for some...
I tend to see things from a unique perspective. When I buy long-shelf-life food items, I always hope that they were not made in some foreign sweatshop where quality control is even less regulated than we have here. So, hopefully increased transoceanic chipping cost will reduce that likelihood.
I agree with you about anti-conspiracy nuts. It's just a veiled way to insult their ideological adversaries
I don't believe container shipment has inflated over the norm by ten times. I have heard that, but where is the proof? Without proof, it is just one more sensational comment. The statement is also too pat and general to be convincing. And-- if it were true, it would be being paid by somebody and ultimately passed to the consumer. If the consumers were actually paying that increase, would there not be lots of news about how the price of imports have skyrocketed? Instead, we hear about the price of butter and eggs going up.
I think that if ocean shipping prices were up 1000% consumers would have stopped buying imported goods. And there would a sudden surge of U.S. startup companies to produce goods that do not require an exotic, overpriced supply chain.
Just lately shipping companies have been bragging about how much they have bought rates down due to the gains in efficiency by the use of ever larger ships.
You aren't understanding what happens when demand exceeds the capacity to handle it. Once capacity is maxed, EVERYTHING starts backing up. One vessel delayed by capacity in docking now has that terminal 8K to 20K boxes behind, the second vessel that is delayed now has the terminal 28K to 40K boxes behind and so on. To get ahead, the terminal has to figure out some way to hanlde 8K to 20K more boxes in the same period of time. If the throughput of the terminal is at its maximum capacity - they AREN'T going to get caught up.
At some point in time demand for the capacity will wane and then the terminal will start to get caught up.
I think that is what I said. Demand will wane and the system will catch up. I'll bet it happens frequently, but we never hear about it. I think it has been much ado about nothing.
The most powerful and newsworthy takeaway is that the supply chain is causing nearly all of the inflation we are experiencing. Imagine that.
EuclidI am no longer convinced that there is a problem. Ships are waiting to dock at the ports. So what? Maybe that is just the way it is expected to work,
Convicted One Euclid mean there is boundless information reported, and it contains so much conflict within it that it loses credibility and cancels out any possible conclusions about what it means. Well, all that I can offer in that regard, is be mindful of context. After one recognizes that there unmistakably is a problem, those critics accusing us of wearing a tin foil hat, are not part of any meaningful solution.
Euclid mean there is boundless information reported, and it contains so much conflict within it that it loses credibility and cancels out any possible conclusions about what it means.
Well, all that I can offer in that regard, is be mindful of context. After one recognizes that there unmistakably is a problem, those critics accusing us of wearing a tin foil hat, are not part of any meaningful solution.
Conspiracy theory has a new fashionable meaning. When some people disagree with any premise, they say the person offering the premise is creating a conspiracy theory. It is nothing more than a cheap personal insult to discredit the person with the premise that the insulter doesn’t agree with.
Our community is FREE to join. To participate you must either login or register for an account.