West braces for Shanghai shock as zero-Covid nightmare ends
Sudden flood of ships from world’s largest port risks unleashing a crippling wave of inflation
An increase in supply from Shanghai is going to increase inflation in consuming nations?
It could be just weeks before Shanghai – a manufacturing superpower, and home to the world’s biggest cargo port – returns to life.
Thrown back into lockdown by Beijing’s disastrous zero-Covid strategy, the city’s reopening will have far-flung consequences for the global economy.
Experts say Shanghai’s reopening may unleash a massive wave of pent-up demand, sending a sudden flood of ships and containers to ports in Europe and the US’s West Coast, which still haven’t recovered from the last round of disruption.
“There is a risk of a tsunami of cargo coming out of Shanghai that could make a bad situation worse,” says Simon Heaney, a supply chain researcher at Drewry, the maritime consultancy.
What?
There should be a word for this. It’s the same phenomenon as anything & everything is a result of climate change. Anything & everything can cause inflation.
Jesus the supply bottleneck loosed and they talk up inflation..typical journalism, like to scaremonger. Gonna be monkeypox next. Wonder when tosspot Murphy jumps on the bandwagon with its 3 week isolation period. Will be getting a hard on about the full scale lockdown potential..
‘Anything & everything can cause inflation.’
Yes BiS. As always, we have the answer, now what’s the question?
Possibly inflation in Shanghai as everyone is allowed out to go and buy stuff from the empty shops. Also, stuff going in is bottlenecked, possibly causing inflation in the cost of raw materials and energy which makes its way through to finished product — but the claim that this is caused by stopping lockdown is absolutely farcical. It’s better to have no goods produced than slightly more expensive ones? OK, that is consistent with the looniest of the green fringe…
I wonder how many times he’s going to catch the pox!
A shift in the supply curve has nothing to do with inflation
Thank you Tim; I read this yesterday and thought, huh? More availability of products causes price increases how exactly? I’m glad it wasn’t me having a brain spasm.
There is a risk of a tsunami of cargo coming out of Shanghai that could make a bad situation worse, says Simon Heaney, a supply chain researcher.
Worse than no cargo coming out of Shanghai and people starving?
I think he’s in the wrong job. Or perhaps he’s like the oil company execs who want to stop drilling ‘for the planet’ – a supply chain researcher researching ways to end the supply chain, to ‘stop climate change’.
If inflation is caused by too much money chasing too few goods, adding “a tsunami of cargo” to the goods being chased will affect inflation how?
It seems like this was originally an article about ongoing disruptions to the shipping industry that has had mentions of inflation pasted over it to make it topical. If you read it entirely in the context of the disruptions plus consequences and ignore especially the ridiculous, incongruous sub-heading, it makes sense in a rambling way.
“ says Simon Heaney, a supply chain researcher at Drewry, the maritime consultancy”
Maritime consultant – is he talking about price rises in shipping & cargo handling, would make sense if there’s a sudden big increase in exports from Shanghai, but some thick journalist has misunderstood it to be general inflation?
Simon Heaney, you are Richard Murphy and I claim my five pounds.
If there is a tsunami of ships sailing from Shanghai they will mostly be empty. The problem is not the the lack of shipping but the lack of goods to ship. Manufacturing in the region (not just Shanghai) has been at a virtual standstill.
Well there is a process by which Chine re-opening could drive up inflation, which is increased demand for energy and commodities, which drives the global price up and increases inflation here.
And if you actually read the article it does propose a viable reason why a wave of goods leaving China could result in higher prices in the West – namely that shipping rates would go through the roof, as everyone tried to charter ships at the same time, which in turn would affect the price of the goods shipped. So yes there might be lots of Chinese tat available in the West, but it all would cost more due to rising shipping costs. Its not as insane an idea as you make out.
‘… unleash a massive wave of pent-up demand…’
Reminds me of Willie Whitelaw who speaking of another ‘Honourable Member’, said: ‘He goes about stirring up apathy.’
If the container ships leaving Shanghai for the West aren’t full, then shipping rates won’t go through the roof.
A bottleneck in shipping (dozens of loaded ships suddenly approaching land) then you’d be a mug not to increase port fees. Thereby adding 0.001% to inflation.
If Shanghai hasn’t produced anything for two months the ships waiting to dock won’t have much to load. Therefore the small amount of Chinese tat they do supply will be more expensive, adding another very small bit to inflation.
In all respects it would seem that inflationary effects are very marginal.
Don’t want to solemnify the tone of the debate but in the case of Murphy we are talking someone who is as close to pure evil as its possible to get so any comparison, unless with someone working in the German administration from 1933 to 1945 or a similar regime should be avoided!
In fairness The author writes more amenably in tone and a lot closer to reality than Richard Murphy ever is, was or probably could be. It’s a bit of a weird article though – I can see that increases in shipping costs caused by a sudden surge of demand in Southern Chinese ports might need to be passed on but to be honest that’s to a certain extent ‘baked’ in by retailers. I’d hazard that the need of certain companies to try and source substitutes for Chinese made goods has already caused price rises so the overall impact will be at worst neutral. I tend to agree with Jim’s assessment of things (as is often the case…)
I see the CCP has shut down Tianjin, another major port.
So as one opens, another closes. Net result… I suppose Chinese freight is going round in circles as exporters move goods from one port to another.
A few seconds’ research tells me how big a shipping container is, and tells me the docking fees at Felixstowe are £92 per container. If that was more than doubled to £200, then that’s an addition 8p on each of 2300 pairs of trainers in that container. A whooooopppping 0.03% increase on the retail price. 0.005% on an iShiney.
People like Lord Spudcup just Do. Not. Comprehend. how infinitessimely cheap bulk shipping is.
Yes, too many people’s needs will have been satiated. Just think of the consequences.
“A few seconds’ research tells me how big a shipping container is, and tells me the docking fees at Felixstowe are £92 per container. If that was more than doubled to £200, then that’s an addition 8p on each of 2300 pairs of trainers in that container. A whooooopppping 0.03% increase on the retail price. 0.005% on an iShiney.”
Docking fees do not sound like the cost of shipping a container from Shanghai to Folkestone. It sounds more like the cost of unloading the containers once they arrive.
According this:
https://www.freightwaves.com/news/are-you-shipping-me-32000-container-move-from-china-to-la
It cost $18k for a standard shipping container from Shanghai to West Coast USA, last July. Lets say that goes up 50% because of extra demand from Chinese exporters. Thats $9k on a container, or about $4 per pair of trainers. Add in the margins of everyone from dockside to shop shelf and I could see the price of trainers going up $10/pair in the shops. For a (currently) $30 pair of trainers thats a 33% rise.
Yes, the £92 is the per-container charge of lifting a container out of a ship for transfer to a lorry. I looked at that because that was what was mentioned in the previous comment, plus I couldn’t be arsed to dig any further.
With goods transport, the closer to the customer, and the smller the quantity, the more expensive the transport. Getting the one item you have bought from the shop to your home is the most expensive portion of the route by far.
Also, where are you getting trainers for only $30? 😉
“where are you getting trainers for only $30?”
There’s plenty of place online that sell trainers for £20, which is less than $30. Anyway even if they cost $100 now its still an extra 10% on the price, which is still a hefty rise.
“It cost $18k for a standard shipping container” That is pandemic, shipping chaos pricing. More normal times it’s more like $3k, maybe $4k. And the container will carry 10,000 pairs of shoes too….
Jim said:
“ the article does propose a viable reason why a wave of goods leaving China could result in higher prices in the West – namely that shipping rates would go through the roof, as everyone tried to charter ships at the same time, which in turn would affect the price of the goods shipped”
But manufacturers won’t ship goods unless they can get them here for less than the current wholesale price. So this is pretty unlikely to actually increase prices more than they are now.
But what it might mean is that prices won’t drop by as much as we’re expecting once the Chinese factories start shipping again, because initially some of the price reduction from increased supplies will be partially cancelled out by increased shipping costs.
“And the container will carry 10,000 pairs of shoes too….”
Doing three multiplications and five divisions in a row I had a huge worry I was going to be out, but it looked eyeball right — but I didn’t expect to be out by nearly a whole magnitude!
Fetch the comfy cushion. 🙂
” That is pandemic, shipping chaos pricing. More normal times it’s more like $3k, maybe $4k. And the container will carry 10,000 pairs of shoes too….”
So are you saying that a shipping container costs $3k now? If it doesn’t, and $18k is a realistic price today, then what it cost 3 years ago is irrelevant.
Jim,
Shifts in supply and demand curves are not related to inflation nor are and subsequent price changes.
“Shifts in supply and demand curves are not related to inflation nor are and subsequent price changes.”
So when prices go up thats not inflation?
[Yes I know you’re just being pendantic about inflation technically being the increase of the money supply yadda yadda yadda, but to the poor stiff buying something it really doesn’t matter why the price has gone up, all he knows he’s got poorer.]
Jim, I’m not being pedantic. It really matters what technical language is used to describe the situation and correctly diagnose the cause and estimate the effects. “They” know this and deliberately use this smoke screen to obscure. At least they’ve stopped referring to “animal spirits”.
You are being pedantic because the definition of inflation is not just a rise in the money supply. Thats one definition. It also means general rise in consumer prices, for whatever reason. Look in the dictionaries. When people say ‘a rise in inflation’ they normally mean a rise in prices.
Shipping costs – seems the arse has fallen out of the ship recycling market.
https://www.hellenicshippingnews.com/ship-recycling-market-in-dire-straits/
So, there may be a bit of extra tonnage knocking about (assuming the things are seaworthy).
Jim I’m sorry you don’t get the importance of the distinction. The damage done to society by fiat money expansion is more significant than temporary supply shocks due to covid or war. The destruction of purchasing power due to monetary inflation should have us protesting in the streets. So I suppose it makes sense to keep people ignorant of monetary theory.