Transportation costs soar again
Supply chain update
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The prices of goods shipped from Asia to Europe have soared in the past year. However, in recent months, the growth has been particularly significant. This is a chart compiled by Xeneta, which specializes in data on the cost of booking space on one of the 40-foot containers in every ocean in the world:
This adds approximately $6,000 in shipping Per container Since the end of April.
Not only has it become more expensive to transport goods across the Indian Ocean and the Suez Canal, but the service has also become worse. Emile Naus, a partner of BearingPoint Consulting who specializes in supply chain management, said that exporters are full of complaints:
We have received many reports that even with high fees paid, the containers are still being put on the ship. This undoubtedly caused some customers to oversupply products in an attempt to maintain inventory levels in Europe. The result is that there will be problems with warehouse capacity, and this will undoubtedly lead to a bullwhip effect, which will actually lead to more uncertainty in shipments by 2022.
According to the data logistics agency project44, the delays of routes from China to Europe are also increasing:
In many manufacturing industries, the barriers to manufacturing and distributing goods that emerged at the beginning of the pandemic seem to have been overcome. Mark Dow, an independent macro trader with a large following on Twitter, told us on Twitter Spaces last Friday that he now believes that the United States has reached a point where the rise in the number of Covid-19 will offset the economy The rebound is of little help. The reason is that at this stage, companies have learned to cope and can easily bear the impact of the ever-increasing number of cases.
However, what we see on the Asia-Europe route may reflect broader inflation trends in the overall shipping market, especially since freight prices from East Asia to the West Coast of the United States have also picked up in recent months.
In fact, monthly freight rates have risen by 20%-higher than European routes (although the transportation cost of a 40-foot container from Shanghai to Los Angeles is far less than the freight from the east coast of China to Hamburg) or Rotterdam). The data, as before, through Xeneta:
Insufficiency is still a problem. But analysts believe that one of the factors driving the recent trend is the increase in Covid-19 cases in China. This is Josh Brazil, vice president of marketing for project44:
In fact, ships are still delayed, and now the Covid mutation outbreak in China’s major manufacturing centers is on the rise, indicating that Black Friday and the holiday shopping season may have a profound impact downstream. ..
… One of the few cases in 2021 is local delays, and the situation can change almost overnight.
The big question now is how big the impact of this increased deadlock we have seen throughout the pandemic. We have seen some impatience in global stock markets. Will we begin to see it have a major impact on commodity production, or will companies become better at building inventory? We will find out in the coming weeks.
In the long run, analysts increasingly believe that we will see backflows, and companies say they will move their supply chains closer to the local area. This is Naus’s opinion:
Increasing transportation costs, coupled with the risks inherent in long delivery times and concerns about increased trade restrictions, are now forcing re-evaluation of purchasing decisions, which may bring production closer to the market.
However, reflow is easier said than done, so we will pay close attention to whether the company really puts money on the lips.