By Richie Lin 

Last week, CPI of USA in January 2023 was 6.4%, which is the seventh consecutive months declining from the highest 9.1% in June 2022. CPI kept decreasing because the prices of importing from overseas countries have been falling several months due the dropping of ocean freight and airfreight rate. However, people are beginning to worry CPI will not drop to 2% or 3% within 2023 because service inflation such as labor costs and property costs didn’t decrease as market expects. The reason why FED kept increasing the interest rate is to restrict the money in the market in order to suppress the consumptions on goods and services. However, service inflations didn’t go down as well with the goods inflations because there is shortage of labors caused by the Covid-19. Many restaurants, hospitals, trucking companies and other service providers cannot hire enough labors to do the routine works, so they are forced to raise the salary to keep the personnel and hire the new ones. In addition to the increase of labor costs, there is another crucial factor to keep the service inflations at the high level. This crucial factor is the ever-escalating warehouse charges, which have increased 10% year to year comparison between 2021 and 2022. Less and less consumptions have caused lots of inventory idling in the factories or in the warehouses leased by the whole-sellers and retailers. Although the inventory is high but buyers cannot cancel orders to factories completely because they fear factories will turn down their orders when economy comes back to normal in the future. Therefore, buyers in America need to keep expanding their warehouse spaces to accept products to come, even though in a slower path. However, it is difficult to apply loans from banks to build up new warehouses because current interest rate has reached 4.5~5% under FED’s pressure to suppress the inflations. Since there are no enough warehouse spaces in the market, warehouse charges are pushed up eventually. In order to control the inventory level reasonably, the JIT (Just In Time) theory will be used again when most of companies decide their purchasing and production plans. If companies really want have better performance on JIT strategy, they will need nearshoring production sites or warehouses to provide materials timely. However, the warehouse charges are higher than before, buyers will use bargain power to urge sellers to set up warehouses locally to build up inventory for JIT orders. Medium and small companies don’t have as many as resources like huge global companies but they can rent the warehouses of third-party logistics companies to establish short term inventory without investing huge money on the assets of lands and constructions.

FCL market rate reference in week 8:

• Asia main ports to USAWC USD 1450~1800 per 40GP; 
• Asia main ports to USAEC and Gulf USD 2600~3000 per 40GP; 
• Asia main ports for IPI points of USA is USD 3800~4800 per 40GP. 
• Asia main ports to Europe base ports and West Mediterranean: USD 2500~3000 per 40GP.

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