Tag Archives: globalization

The Cost of Fuel is Changing Globalization

The New York Times has a good article on how the rise of fuel prices is changing globalization.

Emma_Maersk_2The cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade, according to a recent study of transportation costs. Big container ships, the pack mules of the 21st-century economy, have shaved their top speed by nearly 20 percent to save on fuel costs, substantially slowing shipping times.

It’s odd but I noticed the other day when I went into Dollarama to buy some cheap locks for the lockers at work that stock was surprisingly sparse and I assume that a busier than predicted summer combined with slower shipping times equals distribution problems for retailers.  As the article says, this could mean the end of just in time shipping as we know it and back to the idea of neighborhood warehouses.  I guess this means that we can kiss fresh avocados in February goodbye around here.

Shipping costs crimping globalization

The New York Times has a good article about how shipping costs are changing production patterns.  I think the article misses the point that this could mean that many of the goods that we take for granted as being cheap are going to cost us more and more over time.  It isn’t just the shipping costs oil effects but almost everything we manufacture today.  While there is a small trend towards localization again, that also means that North American wages are going to have to be factored in.

The cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade, according to a recent study of transportation costs. Big container ships, the pack mules of the 21st-century economy, have shaved their top speed by nearly 20 percent to save on fuel costs, substantially slowing shipping times.

The study, published in May by the Canadian investment bank CIBC World Markets, calculates that the recent surge in shipping costs is on average the equivalent of a 9 percent tariff on trade. “The cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today,” the report concluded, and as a result “has effectively offset all the trade liberalization efforts of the last three decades.”

If I was a low end importer of goods like Dollarama or even Wal-Mart, I would be worried right now.