"Capacity Strains" Send Cost Of Transporting Cars Across Ocean To 13-Year High

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by Tyler Durden
Tuesday, Sep 07, 2021 - 07:10 PM

Container shipping rates are in uncharted territory. Dry bulk rates are at decade highs, and the latest boom in rates because of the shipping crunch has been with vessels that move wheeled cargo across the ocean, according to Bloomberg

Cargo ships designed to carry wheeled cargo, such as cars, trucks, trailers, and railroad cars, buses, and or even heavy machinery, commonly referred to as Roll-on/roll-off (RORO or ro-ro) ships, are demanding nearly $25,000 per day, with at least one vessel that has been booked for three years at the cost of $30,000 a day, according to Pareto Securities AS. These rates are more than triple the 5-year average rate for hiring a vessel to haul as many as 5,000 cars at a time. 

According to Torbjorn Wist, chief financial officer at Oslo-listed car carrier Wallenius Wilhelmsen ASA, global supply chains remain a mess as car sales recover. This has pressured RORO vessel rates higher. 

Wist believes the "capacity strain will continue for now." 

And according to industry experts, trans-pacific supply chains will remain swamped through at least the summer of 2022. 

Shipping rates have soared due to the conjunction of booming demand and tangled supply chains of seaports, vessels, and trucking companies that move goods worldwide. This form of inflation pushes end goods higher as companies can no longer absorb the higher costs due to margin erosion. 

Day by day, the Federal Reserve's narrative of "transitory" inflation falls apart at the seams.