AEC Industrial Magnetics Manufacturing

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Alert: Worldwide Shipping Crisis Affecting Permanent Magnet Price And Availability
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Alert: Worldwide Shipping Crisis Affecting Permanent Magnet Price And Availability

Permanent & Electromagnets for Automation | AEC Magnetics

china shippingA series of critical circumstances is disrupting shipping and supply chains worldwide. Ninety percent of the world’s goods are shipped by sea, and two-thirds of those goods are shipped by container. China shipping is most affected. This is particularly bad news for permanent magnetics customers since China mines, processes and exports virtually all of the world’s permanent magnets. The crisis will raise prices and lower availability of permanent magnetic materials worldwide, AEC Magnetics included.

“Orders scheduled for delivery from China in 60 days are pushed back to 90 days, and could go even longer,” said Bill Klaus, president of Cincinnati-based AEC Magnetics, importer of permanent magnetics since the mid- ‘80s.  “The cost of shipping has forced us to adjust our prices. AEC is in a much better position than most to handle this, due to our long history of finding, evaluating and establishing relationships with China’s best permanent magnet manufacturers, however the challenges are significant and out of our hands. My sources report about a 70 percent disruption in China shipping alone, and that’s not taking into consideration the serious disruptions in the western-U.S. ports and U.S. rail stoppages.”    

Klaus emphasized this is not a problem exclusive to permanent magnets. “It is not just magnets,” Klaus said. “Ninety-percent of the world’s goods move by sea, and 60 percent of all cargo moves by container. Bicycles, IT parts, automobiles, computers, smartphones, furniture, appliances to computers, it is coming by sea and by container ships. If you have not noticed, you will.”

“Last week, the World Container Index composite cost of shipping a 40-foot container on major East-west routes spiked to $9,613.  That is 360-percent higher than last year.  Rates on the Shanghai to Rotterdam route shot up 659-percent over last year.  We have been told by our logistics partner to prepare for exceptionally high rates through this year, into 2022. As long as demand continues to rise, which it will, and capacity continues to contract, shipping will remain in critical condition.”

Here are some of the specific stresses affecting shipping.

Another ship 1Typhoon season.  A brutal typhoon season and extreme weather throughout the Asia Pacific region caused shutdowns, disruptions and backups. Shanghai Pudong Airport suspended shipping this month. The port of Yantian, one of China’s major ports which serves its industrial hub of Shenzhen suspended shipping and container drop-off services. The port of Yangshan, a mega-terminal serving Shanghai, and a chain of smaller ports nearby, closed this summer. Major flooding closed manufacturing facilities, rendered mines inoperative and damaged manufacturing plants in China. Typhoons presented a danger for carriers already at sea, with at least one carrier en route to the U.S. hit hard enough for its containers to be blown off the ship.  Ports are working extremely hard to reduce the backup, but with two dozen or more carriers waiting to unload and meteorologists forecasting 16-18 typhoons in the Northwest Pacific and South China Sea before the typhoon season ends, relief is not imminent. 

southchinashippingCovid-19:  Chinese officials partially closed China’s third-largest container port located at Ningbo last week.  A dockworker at Ningbo’s Meishan terminal was found to be infected with the delta variant of Covid-19. Meishan accounts for fully one-quarter of Ningbo’s shipping capacity. It remains closed with a “re-evaluation of its status” expected later this week. Ningbo ships automobile and IT parts worldwide and is a major exporter of permanent magnets. This follows two other Covid-19 China port closures this summer. Covid-19 severely limited crew changes, finding and transporting crews and offloading itself. China requires Nucleic Acid Amplification, or NAAT, Covid-19 tests for everyone aboard each ship before granting permission to dock and discharge. Ships wishing to discharge at multiple Chinese ports are prohibited from proceeding to the next Chinese port if a confirmed Covid-19 case is found, even if the affected crew disembarked. Then, the ship is required to discharge all of its cargo at the first port of entry or wait 14 days in quarantine before seeking permission to discharge at the second port. The logistics of moving the cargo is complicated by arranging for import and transport on the fly. Plus, all ships inbound from India, or has bunkered with or has any connection to an Indian ship or crew, is mandated to quarantine for up to 28 days.  

imageShipping container shortage:  Theoretically, there are more than enough shipping containers to handle global trading volumes. In reality, the availability is incredibly tight because large volumes of containers are stuck in the wrong place. It’s more than ships stuck asea waiting for offloading. The container ship stuck in the Suez Canal earlier this year accounted for a tremendous backup due to container ships stranded behind it.  Also, in the early months of the pandemic, consumer demand tanked, shipping lines cancelled many Asia-North America routes and thousands of empty containers were stuck in the U.S. Consumer demand perked up three months ago but exporters are now facing long waits for empty containers. One Covid-19-related closure in China alone left 350,000 shipping containers sitting empty.  

train intermodalU.S. Transportation: The number of ships waiting to offload in Los Angeles, which handles more than one-third of U.S. imported goods, is typically zero to one.  Today, it’s 33.  While terminal operators and longshoremen work around-the-clock to ease the backlog, they’re continued to be challenged by Covid-19-driven layoffs, container shortages, training, rail stoppages in the midwestern U.S. and the elephant in the room, the tremendous size of the new generation of container ships which have doubled in 20 years. New container ships can accommodate 24,000 containers, enough to fill 44 rail cars.  What caused the mega-ship explosion?  Consumers’ appetite for electronics, gadgets, appliances, shoes, clothing, pretty much everything.  Ninety-percent of it is shipped by sea, and more than half by container ship.  While the longshoremen continue to offload the cargo, inland rail yards are a sticking point. Trains full of clothing, computers, furniture and appliances have been streaming into Midwestern hubs. The system is supposed to work like this: containers are lifted from arriving trains, put onto a wheeled chassis, then hauled away by a big rig and unloaded by the final customer. Empties go back to the yard.  The flood of cargo has overwhelmed this system, however, leaving yards with few chassis.  Containers continue to pile up by the thousands as the containers now are lifted off, placed in storage, and moved a second or even third time before leaving the yard. Union Pacific and BNSF Railway now meter their traffic in and out of midwestern bottlenecks like Chicago to avoid big backups.  That means the backlog has to cool its jets somewhere, at a cost.bill august 24 21

Klaus offers these suggestions to permanent magnetics customers.  “If you are even thinking of permanent magnets, order them.  This locks in today’s price for you and guarantees you will get your magnets.  Consider bulk orders.  AEC offers price breaks for volume orders and this certainly saves money.  Also, blanket orders are a tremendous way to save. Order a certain volume, lock in your price now, and let us release them back you on your schedule. Finally, while we certainly do ask you buy from AEC, no matter where you purchase your permanent magnets be sure they are from a reputable seller. Substandard magnets hit the market during hard times. Do not chance receiving lower strength or quality than you pay for.”   

Please call AEC if you have any questions about the current shipping crisis, your magnetic application or just to say hello.  We’ve been in business for more than 60 years serving customers one at a time, giving all of our attention to learning how we can best help.  If it’s’ magnetic….it’s AEC!