Costco rents its own container ships to sidestep global shipping crisis

Costco rents its own container ships to sidestep global shipping crisis
Costco rents its own container ships to sidestep global shipping crisis

Costco will rent its own container ships to import products in a bid to ensure their shelves are stocked and to keep costs down as the global shipping crisis threatens the holiday shopping season.  

Costco CFO Richard Galanti said on a call with analysts last Thursday that the company had hired three ships to carry goods from Asia to the US and Canada. The move will help them avoid spending the going rate of six times the average price on shipping or renting containers through a third party, according to Galanti. 

Each ship would have the capacity to hold between 8,000 and 1,000 containers at a time. The company has also leased 'several thousand containers for use on these ships,' he added.

Costco plans to carry about 10 deliveries over the next year using these ships, taking around 20 percent of its imports from Asia into account.

The warehouse club chain is among a large group of multinational corporations trying to combat an ongoing supply chain crisis that's causing delays and shortages, including FedEx, Walmart and Home Depot. 

In an aerial view, container ships are anchored near the ports of Long Beach and Los Angeles as they wait to offload on September 20

In an aerial view, container ships are anchored near the ports of Long Beach and Los Angeles as they wait to offload on September 20

The May 2021 image above shows the CMA CGM Marco Polo arriving at the Port of New York and New Jersey. The port surpassed Long Beach, California as the second busying port in the United States earlier this year

The May 2021 image above shows the CMA CGM Marco Polo arriving at the Port of New York and New Jersey. The port surpassed Long Beach, California as the second busying port in the United States earlier this year

Factors such as a decrease in demand over the first months of COVID-19 in 2020, followed by an overflow at the back end of year, has resulted in delays, port traffic jams, and blockages. A lack of port workers and containers has worsened the situation.

Simultaneously, top retailers are facing the consequences of truck and driver shortages, leading to longer delays and higher costs.

'As I discussed on last quarter's call, inflationary factors abound,' Galanti said. 'Higher labor costs, higher freight costs, higher transportation demand, along with container shortages and port delays... It's a lot of fun right now.' 

Costco's standard rollout time for new products in its stores had doubled in some cases, he said, adding that furniture, toys, computers, video games, and appliances had the biggest delays. There were even some limited sales of toilet paper and water introduced at certain locations. 

Meanwhile, more than two dozen container ships appear to be stuck at sea miles off the south shore of Long Island waiting to enter New York harbor, according to a maritime traffic monitoring website, and more than 60 vessels wait to dock at two of the country's largest ports on the West Coast.

The logjam at the nation's busiest ports comes as the retailers reel from a supply chain crunch that has been exacerbated by a shortage of truck drivers.  

The situation has deteriorated to the point where supermarkets have been unable to stock their shelves with products, while FedEx has had to reroute hundreds of thousands of packages.

MarineTraffic, the global ship tracking site, shows cargo ships and oil tankers clustered just a few miles off the New York coast as they wait to unload their goods at the Port of New York and New Jersey, which appears to be beset by the same congestion at the Ports of Los Angeles and Long Beach.

DailyMail.com has reached out to the Port Authority of New York and New Jersey seeking comment.

Some two dozen container ships were stuck at sea miles off Long Island over the weekend

Some two dozen container ships were stuck at sea miles off Long Island over the weekend

The New York area has not been immune to the supply chain crunch that is affecting the American economy.

John Catsimatidis, the owner of the Gristedes grocery chain, says that his stores have experienced shortages in Coca-Cola products.

'We have shortages in our New York stores because Coca-Cola, they can't get truck drivers to deliver into New York City,' he told Fox Business.

'And it's a serious problem.' 

Earlier this summer, New York and New Jersey surpassed Long Beach as the second biggest port in the country. Los Angeles is the largest port in the US.

In June, LA recorded 467,763 TEU of imports. TEU, or 20-foot equivalent unit, is a unit of measurement used to determine cargo capacity for container ships and terminals.

The port of NY/NJ saw a 47.8 percent year-on-year increase in June. It recorded 390,169 TEU, according to The Load Star.

The increased activity at the ports is a result of the surge in imports driven by demand for consumer goods that Americans are eager to buy after the end of coronavirus-related lockdowns.

The enormous demand doesn't appear to be showing any signs of slowing down in the near future, according to analysts.

Earlier on Saturday, a satellite image captured more than 60 container ships that are stuck waiting to dock outside the ports of Los Angeles and Long Beach as a massive supply chain crunch hits the United States.

The extraordinary sight of vessels unable to berth is due in part because of a massive backlog that has been caused by a sudden surge in American buying ahead of the holiday season. 

The number of ships that are currently anchored outside the major ports, which moves 40 percent of containers in the United States, has tripled over the course of the past two months to 62. 

The Port of Los Angeles and Long Beach currently has 62 cargo ships waiting to dock

The Port of Los Angeles and Long Beach currently has 62 cargo ships waiting to dock

Pandemic-driven port congestion and labor shortages have forced retail chains including Costco to spend more on transportation. Cargo ships are pictured on September 20 waiting to dock at traffic-clogged Los Angeles ports

Pandemic-driven port congestion and labor shortages have forced retail chains including Costco to spend more on transportation. Cargo ships are pictured on September 20 waiting to dock at traffic-clogged Los Angeles ports

The west coast ports serve as the entry point for a third of imports to the US, and are the main import point for goods coming from China

Amid a record-high demand for imported goods and a shortage of shipping containers and truckers, the twin ports are currently seeing unprecedented congestion

Amid a record-high demand for imported goods and a shortage of shipping containers and truckers, the twin ports are currently seeing unprecedented congestion

Lines are now at their longest since the start of the pandemic. 

The backup at the country's busiest port complex has been brought on by a pandemic-induced buying boom, coupled with a labor shortage that has overwhelmed the port workforce, according to port officials say. 

The shipping traffic jams come as the US and some other economies are beginning to head towards normalcy and shows how messy the reopening of business is proving to be more than 18 months since the pandemic's onset. 

It also shows just how fragile supply chains remain.

The 62 container ships waiting to dock include 42 container ships physically at anchor and 20 in drift areas, according to the Marine Exchange of Southern California, which tracks ship traffic in the area.  

The West Coast ports have faced traffic since August, when a then record-breaking 44 container ships were stuck off the coast due to similar disruptions.    

The traffic-jam at the ports, which serves as the main entry point for goods coming from China, has even directly impacted the prices for artificial Christmas trees.

The port of Long Beach is now testing out a 24/7 pilot program that would expand the hours for cargo pickup to a time when there is less traffic in the region, allowing for speedier deliveries. 

'We are in the midst of an historic surge in cargo, and our terminal operators and other supply chain partners are giving their all to keep it all moving,' Port of Long Beach Executive Director Mario Cordero said in a statement

'We welcome this pilot project by TTI as a first step toward extending gates to 24/7 operations, and we encourage our cargo owners and trucking partners to give this innovative program a try.' 

A record number of cargo container ships wait to unload due to the jammed ports of Los Angeles and Long Beach near Long Beach, California, pictured on Wednesday

A record number of cargo container ships wait to unload due to the jammed ports of Los Angeles and Long Beach near Long Beach, California, pictured on Wednesday

About 40 percent of all cargo containers entering the US pass through the Port of Los Angeles

About 40 percent of all cargo containers entering the US pass through the Port of Los Angeles

Cargo container ships anchored outside the port of Long Beach in mid August, when the number of ships anchored there was 40, the previous record

Cargo container ships anchored outside the port of Long Beach in mid August, when the number of ships anchored there was 40, the previous record 

Shipping company FedEx is rerouting more than 600,000 packages a day as it scrambles to cope with the labor shortage plaguing businesses throughout the US. 

Raj Subramaniam, chief operating officer at FedEx, announced this week that understaffing problems have caused 'widespread inefficiencies' at the shipping company. 

Subramaniam said that major shipping hubs, like the one in Portland, Oregon, are running on '65 percent of the staffing needed to handle its normal volume.' 

As a result, the hubs are diverting about 25 per cent of the packages that normally come through, Fox Business News reports. 

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