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January 16, 2021 Blog

Surging Shipping Rates Pose New Headwind for Global Economy

Even though the pandemic is raging on, shocks to supply chains are engulfing a wider swath of the global economy. It is predicted that auto manufacturing will take the hardest hit just months after toiler paper and work-from-home gear were hot commodities.

Manufacturers like Volkswagen and Honda were forced to reduce output at their factories as they struggles to procure parts used to make cars.

“The supply-side bottlenecks seem to be more pronounced in the U.S. and Europe where supply delivery times are slowing again,” said Rob Subbaraman, global head of macro research at Nomura Holdings Inc. “This is negative for industrial production in the west and should result in a sharper drawdown in inventories and upward pressure on output prices.”

Shipping experts argue that over 500,000 more 20-foot containers are needed to satisfy the current global demand. In the meantime, standard container rates on transpacific routes are quadruple what they were this time last year.

Just a few weeks ago, the bottlenecks at ports of Singapore, Los Angeles, and Rotterdam were looking at short-term headaches and added costs during peak season. Now they’re threatening to act more like a brake on the global recovery.

Satellite tracking shows that 36 container ships were anchored waiting for berth space at the twin ports near L.A., the busiest gateway for U.S. goods trade. The numbers are up from about 20 vessels right before the holiday season kicked off.

While most shipping analysts see the congestion lasting through the first quarter, there may be longer-term economic costs for both consumers and corporations.

As cloudy outlook continues heading into February, many importers will have to renegotiate freight rates with carriers. In addition, carriers themselves will start to receive the tens of thousands of new containers they ordered last year.

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Even though the pandemic is raging on, shocks to supply chains are engulfing a wider swath of the global economy. It is predicted that auto manufacturing will take the hardest hit just months after toiler paper and work-from-home gear were hot commodities.

Manufacturers like Volkswagen and Honda were forced to reduce output at their factories as they struggles to procure parts used to make cars.

“The supply-side bottlenecks seem to be more pronounced in the U.S. and Europe where supply delivery times are slowing again,” said Rob Subbaraman, global head of macro research at Nomura Holdings Inc. “This is negative for industrial production in the west and should result in a sharper drawdown in inventories and upward pressure on output prices.”

Shipping experts argue that over 500,000 more 20-foot containers are needed to satisfy the current global demand. In the meantime, standard container rates on transpacific routes are quadruple what they were this time last year.

Just a few weeks ago, the bottlenecks at ports of Singapore, Los Angeles, and Rotterdam were looking at short-term headaches and added costs during peak season. Now they’re threatening to act more like a brake on the global recovery.

Satellite tracking shows that 36 container ships were anchored waiting for berth space at the twin ports near L.A., the busiest gateway for U.S. goods trade. The numbers are up from about 20 vessels right before the holiday season kicked off.

While most shipping analysts see the congestion lasting through the first quarter, there may be longer-term economic costs for both consumers and corporations.

As cloudy outlook continues heading into February, many importers will have to renegotiate freight rates with carriers. In addition, carriers themselves will start to receive the tens of thousands of new containers they ordered last year. [post_title] => Surging Shipping Rates Pose New Headwind for Global Economy [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => open [post_password] => [post_name] => surging-shipping-rates-pose-new-headwind-for-global-economy [to_ping] => [pinged] => [post_modified] => 2021-01-16 00:31:28 [post_modified_gmt] => 2021-01-16 00:31:28 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.clipperoil.com/?p=238278 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw )