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July 08, 2021

More Global Trade Follies Involving China: Shipping Bottlenecks And A Container Shortage

So, have you heard about the massive international shipping crisis coming out of China, and the accompanying shortage of overseas shipping containers?

China shipping: Yantian port delays already worse than those caused by Suez Canal debacle in March.

Disruptions to the supply chain for some companies are said to already be worse than those caused by the six-day blockage of the Suez Canal in March, which made global headlines and spawned countless memes on social media.

How about that? We’re just a few months removed from global shipping being massively interrupted by the Suez Canal blockage, and here we are again, with yet another massive shipping interruption. What’s weird is that most of our corporate and political elites concurred that it was imperative to outsource as much manufacturing and raw material production as possible, yet these stunningly brilliant Principled Free Traders™ never once considered the likelihood or consequences of transportation interruptions.

To be fair, Principled Free Traders™ never considered the implications of political unrest, pandemics, or other external factors either. They never considered the possibility that anything might affect getting products from China to America. Their primary motivation was to assert their status as global citizens, and the best way they knew to do that was to destroy American manufacturing and to put as many deplorable Americans out of work as they could.

Your Christmas shopping this year could be held up by a staggering shipping backlog in China's southern ports.

Bummer. Oh wait, now that I think about it, I’ll be OK. There are several locally owned shops in my town that feature toys, crafts, and clothes that are made right here in the United States. My Christmas shopping should not be affected. It doesn’t look so good for others, however:

Chinese Port Logjam Threatens Christmas Shipping Rush.

At Palmer & Purchase, a boutique women’s clothing and accessories shop in Rye, N.Y., owner Abbie Durkin is trying to ensure that the winter line comes in before the holidays. “It will be a race to get a full range of merchandise by Christmas,” she said.

It’s regrettable that Ms. Durkin finds herself in this situation, but having her financial future be so dependent on China and the Chinese Communist Party carries a lot of risk.

The shipping bottlenecks began in late May when a coronavirus outbreak forced authorities to shut down parts of Guangdong province, which is home to Yantian, one of the world’s busiest ports and a major gateway for containerized exports like electronics, furniture, home appliances and car parts.

Wait. What? A new Coronavirus outbreak in China shut down their major port? In May 2021, well after vaccines were readily available throughout the west?? ABCNNBCBS and the major American newspapers all told me that China had defeated the Coronavirus, and that China was actually a role model in how to do it. In fact, here is a NY Times story praising China on its Covid success story:
NY Times: How China Beat Covid-19 and Revived It’s Economy (Feb 2021)

And guess what - concurrent with the shipping bottlenecks, there is also a global container shortage.
Where are all the containers? The global shortage explained.

Ideally the US should be able to ship wheat to Brazil and import coffee back, without China being a factor at all. Containers used in USA-Brazil trade don’t even need to leave the Atlantic Ocean, so why is China a factor? But of course… China has a virtual monopoly on container manufacturing.

How many containers exist is controlled by China. Virtually every ocean shipping container in the world is built there. Just three Chinese companies account for the majority of production, with Chinese factories now building more than 96% of the world’s dry cargo containers and 100% of the world’s refrigerated containers, according to U.K. consultancy Drewry.

Are shipping containers infrastructure?

Of course, Principled Free Traders™ would lament that China’s 96% market share of dry cargo containers is less than the 100% they’d prefer. But they can at least be happy that China controls 100% of refrigerated container manufacturing. It’s reassuring to know that “global free trade” occurs only to the extant that China allows it to occur, isn’t it?

By the way, isn’t the beauty of outsourcing manufacturing jobs supposed to be that the additional cost of shipping products across the globe is still cheaper than paying for labor here in our own country, which also provides consumers with low prices? Not now. Cheap furniture and toys could soon get much more expensive as retailers are hit by rising shipping costs.

"You simply can't survive on this," [Alan Murphy of Sea-Intelligence] told Bloomberg. "Someone is bleeding very hard."

“According to shipping expert Simon Sundboell from eeSea, Nike would have paid $2,000 for a 40-foot container pre-pandemic. Today, it could be paying as much as $20,000 for that same-sized vessel, Sundboell said.

Boo. Hoo.

I’ve got a simple idea that can mitigate a whole lot of these problems. Products that are to be sold in the USA can also be manufactured in the USA. Once manufactured, they won’t be impacted by exotic new virus outbreaks in China, or by a lack of Chinese containers, or by backups in Chinese ports, or even by the ick factor of China’s slave labor.

Even if manufacturing is simply moved from China to other countries, it is way past time to disengage from China.

(buck.throckmorton at protonmail dot com)

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posted by Buck Throckmorton at 03:38 PM

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