Global transportation costs have fallen-but will they remain low?


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Hello from Germany, where supply chain barriers have been hindering growth. The main reason is the impact of semiconductor shortages on the country’s automakers.

The closely watched Manufacturing Purchasing Managers Index is currently at its lowest level in 10 months. Due to supply delays and energy shortages, as well as increased energy and wage expenditures, input costs are also rising rapidly.

Today’s main content focuses on the more optimistic themes of manufacturers in Germany and elsewhere. The surge in global transportation costs may have reached its peak, and prices have fallen sharply since early October.

We hope to hear from you.Send any ideas to [email protected] Or email me [email protected]

Will the transportation cost be kept at a low level forever?

As early as the beginning of October, some news suddenly appeared in our inbox, which was a potentially big news for us.

It is based on some data from a freight forwarding company called Shifl, which shows that container freight from China to Los Angeles dropped by $9,000 between September and October, a drop of 51.4%. (For those who are interested, we used Short post on FT Alphaville.)

Unless you have been sleeping under a rock for the past 18 months, you will realize that transportation costs have risen sharply. On the China-Los Angeles route, during the late summer, a 40-foot container was offered to cross the Pacific at US$20,000. In contrast, the pre-pandemic rate was as low as $1,500.

We are very impressed by Shifl’s record drop in early October, but we are not sure if this marks the end of the trend of ultra-high transportation costs. We think this may be a short-lived phenomenon, which is more of a long-term cause than the power outages in Chinese factories and the Covid-19 outbreak.

Six weeks ago, there was not much evidence in other shipping cost indices that prices have fallen or are about to fall.

This is no longer the case.Short-term rate index compiled by Logistics Data Corporation Chenetta Prices on major trade routes have also fallen. Although not as dramatic as Shifl recorded.

The Freightos Baltic Index, which maps global container freight rates, is also falling.

The 40-foot container transportation cost line chart ($) shows that global container freight is declining

These price drops are also beyond the scope of container transportation. The Baltic Dry Bulk Index, which measures the transportation cost of bulk goods such as iron ore or grains, has also fallen sharply since early October.

The line chart of the Baltic Dry Bulk Index showing the cost of dry bulk has also declined

So, will we see prices fall to pre-pandemic levels? Much depends on what happens in the next two weeks.

Most of the decline in the Baltic Dry Index was attributable to the increase in the capacity of the largest ships (known as the Cape of Good Hope). There has also been less cargo going to China, and congestion through Chinese ports has also decreased. But Semi Assimakopoulou, an analyst at The Signal Group, who uses map data to assess shipping price changes, told us that some of these trends may be about to reverse. There are signs that the supply of ships for Capesize vessels is now becoming more restricted. Demand is still significantly higher than this time last year.

“Usually around the end of November and early December, demand will surge. We have seen a decline in supply, so I believe the price of transporting dry bulk will increase,” Assimakopoulou told us. “Considering the time of year we are now in, they are likely to return to October levels. Shipping is a very volatile industry. We are likely to see this happen before December 10. “

We held our breath and waited to see what happens to container shipping prices. The latest data sent to us by Shifl earlier today shows that the cost of shipping 40-foot containers from China to Los Angeles has actually increased slightly in recent weeks, from the lowest point of US$8,300 to US$10,000.

The global economy has always existed and still has a lot of uncertainty. Few people expect transportation costs to soar so high. Indeed, avid readers may remember our predictions, Come back in january, The price is unlikely to surge much more than in the last few months of 2020. All we can do is put our hands on our flushed cheeks and say, “Oh!”

This call teaches us to avoid being too brave or reckless when predicting what will happen next. If you, dear reader, are more courageous, then we welcome your ideas.

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