The rainy seasons have ended in most exotic lumber areas. Trees have been sawn into lumber, seasoning is complete, and now shipping lanes are reopen. For the next 4-5 months our yard will be brimming with new material from abroad as the supply for the entire year of some species are shipped all at once. It isn’t uncommon to see 12-20 new containers waiting to be unloaded in our yard this time of year and we rely upon this season to maintain a healthy stock of our most in demand products. So now the US government has shutdown and furloughed all “non-essential” employees. How will this affect our ports and therefore this key shipping season for the lumber industry?
The easy answer is that the picture isn’t fully clear yet, but we expect delays. The good news is that the ports are not run by the government but rather union labor and other private organizations. The customs and regulatory organizations that issue and inspect CITES, FSC, Phyto, and other documents and certificates however are government run. So while containers will arrive and be processed, they may end up sitting at the port longer while the bottleneck on the government side takes it’s toll. The worst part about material sitting at a port is the demurrage fees that accrue each day that a vessel is in port without unloading its cargo. Think of this like the late fee you got when returning that copy of Ghostbusters late to Blockbuster. (I’m seriously dating myself with that metaphor) Only now imagine you rented the entire inventory of the store. That’s one heck of a late fee. You see it’s not just that the videos are late, it is the fact that with the entire inventory out for rent that store cannot do any other business. This is the same thing with demurrage. The ship whose cargo is tied up at the port obviously can’t take on more carge or depart for a new destination to pick up more cargo. It is truly unable to conduct business. Unfortunately, the rule of thumb is that no external events like strikes, etc are an exception to demurrage. In some cases, the cargo can be off loaded from the ship and stored at the port. Usually port rental fees are higher than demurrage. In the worst cases these fees can significantly increase the cost of the product which will eventually translate to our customers.
We are going to remain optimistic that business will run as usual at the ports, but considering it never runs smoothly, it is good to be prepared for the worst. We will closely monitor this situation and report back should we anticipate any specific product being effected by the government shutdown. For now all if well and our yard is filling up with Ipe, Mahogany, Sapele, Utile, and other great exotic hardwoods. Our hardwood plywood and marine grade plywood stocks are high and of course our domestic hardwoods like Cherry and Walnut are always well maintained and can be beefed up quickly with onshore trucking. With this in mind we should be able to meet customer demands as usual with the knowledge that new exotic stocks are on the water and enroute, or possibly already in port awaiting customs approval. Keep your fingers crossed the lumber industry and many others that rely upon import products won’t be effected by this government shut-down.