Thursday, April 1, 2021

More on Global Shipping Chaos

 In the last post I tried to outline the complexity of modern international shipping from the local point of view - that is, you buying your new exercise bike at your local store.  But there are some global patterns involved here, as well as a pandemic that has caused so much chaos in society.  I realize this won't interest many of you, so I'm really writing this just for myself. 

To begin with the global container shipping industry has grown faster than the rest of the system. There aren't enough containers to go around, and there are more enormous container ships than there are ports which can handle them.  Both the biggest ports and the factories that manufacture containers are in China.  The biggest ships can totally overwhelm the smaller terminals, leaving other ships offshore, waiting their turn to unload.

One of the Vancouver container terminals (another in the background).

Then along came the pandemic.  Shipping dropped suddenly as business slowed, then it recovered, taking personal protective equipment to poorer countries in Africa, where those containers are often still sitting, empty, because there's no profitable reason to go back and pick them up.  As the pandemic unfolded, consumers started buying exercise bikes, treadmills, laptops and ipads, anything they could get to make a stuck-at-home life better, all usually produced in Asia someplace.  Shipping to Europe and North America particularly to the U.S. skyrocketed unexpectedly.

But the trip bringing those consumer goods to the U.S. was much more profitable than taking bulk goods like soybeans back to China.  So containers in Asia were in high demand and empty containers were left on the west coast because ships didn't want to wait for a low value cargo like soybeans from Chicago or Kansas to be loaded.  

The cost of shipping went up accordingly.  Containers that cost $1000.00 to ship last June cost $4500.00 last month!  Shipping companies have made terrific profits and retailers absorbed huge losses along the way.

It strikes me as supremely ironic that those clothing companies that outsourced clothing manufacturing to Asia over the past three decades in order to make better profits are now complaining about the cost of importing that clothing back into the country!  And the workers are still making the pittance of a wage they get paid.

The container port at Delta, south of Vancouver.

The global shipping pattern is heavily skewed by the most profitable route, that from China to the west cost of the U.S., particularly the Los Angeles area container terminals.  Among western countries, the U.S. has the largest trade deficit, and it's huge.  The U.S. imports far more in consumer products than it exports.  While the EU, the U.K., Canada and Japan's trade balances all go up and down by a few billion, and are frequently positive, the U.S. trade deficit is over $700 billion.

I was interested to see that the trade balance between the U.S. and Canada is typically positive in Canada's favour, but interestingly we tend to trade the same things to each other, thanks to our integrated manufacturing sectors - vehicle, machinery, energy products and plastics.   

I should also point out that the great Lakes ships I've occasionally posted pictures of are all bulk carriers, ships that carry products like coal, grain, iron ore and salt loaded directly into the holds of those ships.  Although there have been container ships on the Great Lakes, the limited size of the St. Lawrence Seaway and the Welland Canal has made it uneconomic.

The much-scraped Algoma Compass, wintering in Owen Sound.

Sorry if this post hasn't interested you in the least, but I found it fascinating to delve into this, partly perhaps because our daughter works in this field.  I'll be able to have a more interesting conversation with her now.

Meanwhile, here in Meaford it snowed for April Fools Day, and  we're moving back into a 4 week lockdown  - I think I've had enough!

16 comments:

  1. I found this post quite interesting. I hope you keep up informing me of the container situation as well as the politics. :-)

    ReplyDelete
  2. It's a very frustrating bit of business for the consumer to be sure. We are about sick of the lock down too. Not that it affects our household so very much in many respects. We sure do want to see our family though.

    ReplyDelete
  3. Yes, it is interesting. Actually it's quite humorous that the companies that outsource manufacturing to the Far East are now complaining about shipping costs. Of course they'll just pass that cost on to the consumer if they can.

    Snow here as well this morning -- April fool after last week's warm days. Covid's increasing here as well and some fools still think it's a hoax. H and I have been fully vaccinated for about four weeks but are still wearing masks when going to the stores and appointments and haven't visited our son and his family for over a year.

    ReplyDelete
  4. I found your post o shipping fascinating. I grew up when a freight train was all box cars. Now there are no box cars just flat bed cars with containers.

    ReplyDelete
  5. We need to reduce our reliance on sources in Asia to make things.

    ReplyDelete
  6. I agree, fascinating to know the ins and outs of the container process. What I want to know, do containers get lost overboard in rough seas, do they float or sink? The containers here, if not in use, are often sold as outdoor workshops, even sleeping quarters, and go for about NZ $8000 each, or you can rent one for about NZ $65 a week I think.

    ReplyDelete
  7. It would be great if manufacturing came back to Canada. That won’t happen!

    ReplyDelete
  8. Very interesting about the container industry. A number probably 30 years ago the Fire Department that I belonged to...bought some containers as an investment...hope they are making some money now:) Sorry you all are going into lockdown again. I suspect soon we won't be able to afford the necessities:(

    ReplyDelete
  9. a great topic that happen to interest me. we purchase one use shipping containers, keep them on our commercial property, for tenants that need them for over-flow storage. we are unable to meet the demand for them!!

    ReplyDelete
  10. On the contrary, I found it very interesting. A lot of the UK's container shipping comes in via the port of Felixstowe and the A14 road, which connects Felixstowe to the English midlands, goes right through Cambridgeshire. So we get to sit behind a lot of container lorries!

    ReplyDelete
  11. We've both found the topic interesting. It makes sense in so many ways to bring manufacturing back to Canada. At some point it will make economic sense to do it. It makes sense now if one looks past the next quarter results and into societal issues. The stock market and executive compensation schemes have really skewed most corporate-think to the short term.

    ReplyDelete
  12. Its always interesting to learn new things and be well informed. Even decades ago when so many things were being outsourced to China I thought 'there is just something wrong about that somehow'. What a mess so much of our world is in nowadays.

    ReplyDelete
  13. I think you are quite an academic as you understand and explain things well and clearly. Pretty concisely too given the complexity.

    ReplyDelete
  14. Somehow, we have to get manufacturing back to North America! Very interesting!

    ReplyDelete
  15. Great post. This is really good research.

    ReplyDelete
  16. It is interesting, as I know I've never really thought about how items make it to my local retailers. One has to assume that once things come back to some even keel there will a lot of empty containers sitting in various places and perhaps a glut of them on the ocean.

    Thanks for sharing this info.

    ReplyDelete