Odd Lots Why the Cost of Shipping Goods From China Is Suddenly Soaring
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Jan 18, 2021 In this insightful discussion, economist and historian Marc Levinson sheds light on the ongoing global shipping crisis that intensified since the pandemic. He reveals how shipping costs from China have skyrocketed, quadrupling on some routes due to rising demand. Levinson also explores the intricate dynamics of shipping contracts, the dominance of major alliances in the industry, and the inefficiencies brought about by larger vessels. Plus, he discusses the humanitarian concerns affecting crew members caught in this turmoil.
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Shipping Disruptions
- Overcapacity in shipping emerged after the 2008 financial crisis, leading to low rates and industry consolidation.
- Increased demand during COVID-19, coupled with reduced spending on services, caused rates to surge.
Shipping Costs and Indices
- Shipping operates primarily through contracts with contingencies, making real-time cost calculation difficult.
- Publicly available indices reflect market forecasts, not actual transaction prices.
Megaship Inflexibility
- Megaships' inflexibility stems from port limitations and the need for regular service routes or "strings."
- Disruptions require time to realign ships within these fixed schedules.
