The high price of “shipping” is starting to show signs of improvement: the BDI is now falling by more than 6%

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The question we surely get every time we try to buy / ship something overseas is why is shipping so expensive in 2021? And the main reason is the current sworn enemy of the world: Covid-19. The pandemic has affected global supply chains in 2020, reflected in shipping prices, which experts say will remain at these levels until 2023.

Economic activity and global trade rebounded strongly in the second half of 2020, driven mainly by the manufacturing sector, while activity in the services sector was and remained subdued. In the third quarter of 2020, global economic activity recovered rapidly, due to the decline in the pandemic and the associated containment measures, as well as the significant political support deployed at the height of the crisis. China opened up its economy before America and Europe, and containers that China needed to ship its manufactured goods were trapped in these two regions, causing a shortage of shipping containers for China. In January, Redwood Logistics stated that “there were around 180 million containers in the world but they were in the wrong place“.

Businesses face a terrible combination of supply chain challenges and higher costs for energy, raw materials, packaging and shipping. It’s not just the semiconductor issue (see note “The Chip Shortage Continues …), but a series of factors are added that most of the consumer goods producers who reported in the week have publicized, although they also showed confidence that they could pass these effects on to consumers, increasing the pressure as Christmas approaches. E-commerce, consumer staples and construction companies should consider diversifying their businesses. delivery options to reduce costs. short-term shipping costs.

Whirlpool Corp. It has already taken action and is moving more cargo by air and rail as shipping companies disrupt the operations of manufacturers around the world. So the washing machine and refrigerator maker cited such issues in the supply chain on October 21 when releasing its trading results, saying its sales had fallen short of Wall Street estimates due to of these problems. The company continues to struggle, like many others, to secure the supply of semiconductors and other components, assured CFO Jim Peters, who took the opportunity to reduce sales growth forecasts for 2021, although he pushed the profit guide.

Nucor Corp., America’s largest steel producer also posted weaker-than-expected quarterly profits, also attributed to supply chain bottlenecks with shipping delays. Despite the historic 92% increase in steel prices this year, supply constraints limit the company’s ability to deliver metal at high customer demand. However, he also commented that this shipping issue is causing some slowdown in the auto and construction industries.

Unilever, like its rivals Procter & Gamble, Nestle and Danone warned in their quarterly results against strained supply chains and rising raw material costs. In fact, Unilever said it raised prices to the maximum in nearly a decade, passing on increased raw material costs to consumers, raising prices 4.1% in 3Q21, the highest rate since early 2012.

Nike She suffers from factory closures in Vietnam, where she produces about half of her sneakers and a third of her clothes. About 80% of its shoe production is currently shut down and it will likely take months for operations to return to normal.

The cost of logistics has also increased significantly. This year, for example, says Bert Flossbach (co-founder of Flossbach von Storch), the freight rate for a standard container almost tripled to around $ 10,000 at the end of the period. For journeys from Shanghai to Rotterdam and New York, fares are even as high as $ 14,400 and $ 15,800, respectively, about 10 times higher than before the pandemic. Another factor driving up transport and logistics costs is the lack of truck drivers, which has even led to gasoline supply shortages and long queues at gas stations in England. This will likely lead to increased wages for truck drivers. There is also a growing shortage of truck drivers in the EU and the US.

Sea containers typically carry, among other things, grains, metals, energy materials and other raw materials, intended for use in global manufacturing and production processes, which are transported in bulk, so-called en English dry bulk. An indicator that is widely followed in the financial industry to see the evolution of the cost of transporting various dry products around the world is the Baltic drought index (BDI), calculated by the London-based Baltic Exchange. It includes averages for Capesize, Panamax, and Supramax, and is obtained by contacting multiple shipping agents to assess price points for various routes, products, and delivery times. This indicator peaked on October 6 this year and even today it has returned to levels of a month and a half ago, with a 6.1% to 3,808 points, a level that touched September 8. Is it the light at the end of the tunnel? Apparently, the justification for this decrease is the lack of demand for this type of transport. We have seen that some companies have decided to use other means of transport …

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