The cost of shipping a 40-foot container from Shanghai to Los Angeles has risen eightfold since late 2019 to almost $12.000. Other routes have seen similar increases, see below.
What does this mean to you and me? It depends.
A 40ft, 66 cubic meter container (double the.size of the “standard” 20ft box) can fit some 800-1000 large flat screen TVs. Do the math: container shipping now costs around $12-15 per TV, up from $1.5-1.90. It’s a huge increase, but for such relatively compact and high value items it’s not exactly a disaster. The higher shipping costs may be absorbed with relatively minor price hikes. For even higher value and smaller items (eg iPhones) the impact to the final consumer is near negligible.
However, for an importer of cheap, large plush teddy bears things are dire. Same holds for all imported goods that have the killer combination of large size and low unit price. For example, clothing/shoes, furniture, toys, even coffee and fruit are shipped in containers. There, prices will need to be adjusted very significantly. Big box stores and their customers will definitely be in trouble.
Two days ago, a ship-owning company announced it chartered one of its Panamax containerships for 2-3 months at an all time high of $200.000 per day. That’s $12-18 million in revenue. Less than three years ago such vessels were in such low demand that many ended in the scrapyard, essentially worthless. Kinda like a meme stock with a super duper propeller.
Long time readers of this blog may remember my posts in 2007 about insane dry bulk cargo rates, and one shipping company’s stock trading at nosebleed levels. It was a time when, incredibly, oil tankers were being retrofitted as dry bulk carriers. Anyone with any type of shipping experience realized what a panic-driven move that was, at the time. Well, shipping rates collapsed soon thereafter and the stock became utterly worthless.
Guess what is happening now? Bulk carriers are being retrofitted as containerships… ayup…it’s deja vu all over again 😜
Things have gotten so bad that the world’s third largest container shipping company just announced that it is freezing spot shipping rates until February 1, 2022 - a dubious move, of course. It’s like OPEC freezing oil prices at $120 per barrel. Still, something to think about in this crazy all-bubble time.
Why are containership rates so high? For one, demand for cheap imports came zooming back after long lockdowns. Secondly, ports had to delay unloadings because of workers getting sick/isolating. Ships that would normally turn around in a day or two are now idling outside ports for more than a week, thus reducing available shipping supply. It won’t last much longer, but for now it is fueling consumer inflation substantially.
interestingly, from what I can find, the number of containers being shipped seems more or less constant...
ReplyDeleteSame demand+less supply = higher prices 😄
Deletebut if the number of containers shipped is constant, it would mean supply is the same.... thus, the higher prices would be coming from higher demand?
Deleteperhaps it will be more true to say, the number of containers should increase year on year..... in this case, a shortage actually means the number of containers did not grow... not sure.... first time I am looking at such data
DeleteContainers are transported by ship on a regular turnaround schedule, like a train or bus. If ships are delayed for any reason then the supply of transport services is reduced.
Deletehttps://www.statista.com/statistics/913398/container-throughput-worldwide/
Deletecan see, the number of containers did not drop.