Laden...
Click here for full report and disclosures
â Surging global shipping costs: Reflecting a recovery in global demand, a rush to replenish inventories and a serious shortage of containers in the ports where they are needed, shipping container prices are surging. The China Containerised Freight index, which tracks spot freight rates on export containers from 14 shipping lines out of China, rose by 50.6% yoy in December. From a low of $842, the price of a 20ft container hit $1,324 in December, according to the Shanghai Shipping Exchange.
â Driving the rise: The COVID-19 pandemic that started in China in late 2019 and continues to spread around the world has massively disrupted global supply chains and the usual shipping schedule that ensures that goods flow between producers and final consumers efficiently. Due to COVID-19-related restrictions, it also takes longer to process containers and distribute the goods at their destinations. As a result, some major producers (such as China) are unable to fully meet the rising demand for durable goods in the rich consumer-orientated economies of North America and Europe.
â An unusual shock: In the early phase of the pandemic, global shipping slumped as producers and retailers cut orders in anticipation of the shock to come. The Netherlands Bureau for Economic Policy Analysis estimates that global trade collapsed by c17% from December 2019 to May 2020. Businesses ran down much of their stocks of inventories during the summer recovery. This eased the pressure on global supply chains. However, firms are now trying to replenish stocks in anticipation of a robust global rebound in 2021 and the hope that mass vaccination can return life to mostly normal by spring next year. The usual seasonal uptick in spending around Christmas adds additional demand-side pressure.
â Visible disruptions: In the coming weeks, delays in delivering final products and semi-finished goods may lead to hold-ups and bottlenecks in some key industries. The impact could be visible in the construction industry, where delays to products required at a certain stage of building can stall an entire project. Sectors producing sophisticated durable goods may also be affected because they often require bespoke rather than generic components that cannot be easily substituted. However, such dislocations in global logistics and supply chains will not last forever. Early next year, conditions should stabilise as demand patterns normalise and the high prices induce shipping companies to transport empty containers to where they are needed. We expect production to make up for temporary current losses in early 2021.
â Modest impact on consumer prices: As our chart shows, producer prices in advanced economies have not yet reacted to the rise in shipping costs. This is not surprising. Shipping costs only make up a small proportion of total producer cost. The extent to which consumer prices edge higher depends on how much of the increase in shipping costs producers and retailers pass on to end-consumers. Based on the 2016 rise in shipping costs, the Kansas Fed estimates that a 15% increase in shipping costs leads to a 0.1ppt increase in US core inflation after one year. But in the wake of the pandemic with output well below potential, pricing power is likely to be much lower than during the 2016 global upswing when major economies were at full employment. Based on the recent 50% rise in shipping costs, a 0.1-0.2ppt boost to inflation across advanced economies is possible for a few months.
Chief Economist
+44 20 3207 7889
Senior Economist
+44 20 3465 2672
European Economist
+4420 3207 7859
This material is intended as commentary on political, economic or market conditions for institutional investors or market professionals only and does not constitute a financial analysis or a research report as defined by applicable regulation. See the "Disclaimers" section of this report.
The commentary included herein was produced by Joh. Berenberg, Gossler & Co. KG (Berenberg). For sales inquiries, please contact:
Phone: +44 (0)20 3207 7800
Email: [email protected]
BERENBERG
Joh. Berenberg, Gossler & Co. KG
Neuer Jungfernstieg 20
20354 Hamburg
Germany
Registered Office: Hamburg, Germany
Local Court Hamburg HRA 42659
Kallum Pickering
Senior Economist
Phone +44 203 465 2672
Mobile +44 791 710 6575
For Berenberg the protection of your data has always been a top priority. Please find information on the processing of personal data here.
Any e-mail message (including any attachment) sent by Berenberg, any of its subsidiaries or any of their employees is strictly confidential and may contain information that is privileged or exempt from disclosure under applicable law. If you have received such message(s) by mistake please notify the sender by return e-mail. We ask you to delete that message (including any attachments) thereafter from your system. Any unauthorised use or dissemination of that message in whole or in part (including any attachment) is strictly prohibited. Please also note that any legally binding representation needs to be signed by two authorised signatories. Therefore we do not send legally binding representations via e-mail. Furthermore we do not accept any legally binding representation and/or instruction(s) via e-mail. In the event of any technical difficulty with any e-mails received from us, please contact the sender or [email protected]. Deutscher disclaimer.
Click here to unsubscribe from these emails.
Laden...
Laden...
