Starting in 2020 with the pandemic and now rolling into 2021, the global supply chain is experiencing several massive hits, one after another. As a result, many businesses have felt the pinch over the last 18 months, including deliveries getting significantly delayed, supplies outrageously back-ordered, and severe shortages of raw materials.
This dilemma is an ongoing crisis across all industries and severely impacting cannabis cultivators, extractors, and producers. Anyone sourcing their ingredients, equipment, or empty cartridges from abroad is seeing unprecedented wait times and astronomical costs.
Compounding Issues Leading to Historic Supply Shortages
The global pandemic and subsequent worldwide shutdown in early 2020 was the initial cause of concern. With most manufacturers shutting down completely while the world grappled with the many unknowns of COVID-19, the entire supply chain suffered.
The global supply chain remained heavily congested throughout 2020, thanks to markets reopening and then reclosing in fits and starts.
Raw materials were not getting extracted, manufacturers were not producing, and shipments were not moving. In a piece for Forbes, Justin Pierce, a principal with Hydroponics, Inc., highlighted his experience with a two- to three-month delay for most of his cultivation supplies, like pots, lights, and more.
In early 2021, while many of us giggled at the countless Ever Given memes, the container ship caused massive backlogs well beyond the Suez Canal. This near-weeklong blockage ended up costing the world $400 million an hour in delays.
Now, these issues are compounding for everyone across the cannabis sector and beyond.
Not Over Yet, The Looming Shipping Container Shortage
In a statement for the New York Times, Lars Mikael Jensen, SVP and Head of Global Ocean Network with Maersk, said, “I've never seen anything like this.” As an executive for the largest shipping company in the world, Jensen is watching as the global shipping network is seemingly coming apart.
He explained, “All the links in the supply chain are stretched. The ships, the trucks, the warehouses.” With no containers to load on the continent, Asian equipment manufacturers watch as orders pile up on factory floors. Likewise, buyers in North America are frantically trying to make Plans B, C, and D as they await long-delayed equipment. As a result of these delays, customers see product shortages and increased prices.
There are several reasons for this sudden empty container upset. The first is the dramatic changes to the traditional shipping patterns thanks to COVID-19. For example, in 2020, North Americans and Europeans bought everything online—much of which came from Asian manufacturers. This boom created a backlog of empty containers at the site of import.
Second, many containers were diverted to conventionally quieter areas of the world, like Africa. Filled with medical supplies and PPE, these containers are now stuck in these neglected ports because shipping companies do not have the capacity to retrieve them.
Third, most busy ports, like Vancouver, Canada, and Long Beach, California, are weeks behind schedule due to labor shortages and limitations. Container ships sit for weeks out at sea, just waiting to unload at the port.
Together, these issues have tripled the price of overseas freight. Moving a 40' container from Asia to North America typically cost around $2,000 to $3,000 only a few years ago. A Vancouver-based importer (who wished to remain anonymous) confirmed some freight prices had gone up to $15,000 to $20,000 per container. In his words, “Money talks right now. If you want space on the ship, you need to have an agent at the destination to help feed the right hands.”
Impacts of the Shipping Crisis to Linger for Cannabis Companies into 2022
Empty shipping container shortages are nothing new in the shipping industry, but there has never been a shortage of this magnitude, with no end in sight. The freight increases and backlogs that started in 2020 are likely to linger into 2022.
Cannabis cultivators hoping to package up the fall harvest in time for the holiday rush are likely going to struggle to get even basic packaging like pouches, jars, and empty vape carts. This shortage may lead some companies to hoard supplies in preparation for more expected delays—a method that will likely further compound the problem.
With shortages from raw materials to empty shipping containers, some estimates have placed lead times for construction manufacturing at their longest since 1987. This news doesn't bode well for cultivators or extractors hoping to open, expand, or upgrade equipment.
Shipping delays are already severely impacting cannabis and will continue to do so for the foreseeable future. So how can businesses mitigate the costs? Patience, strategic pivoting, and having several backup plans in place will be vital to making it through the next few months.