Pandemic makes 'Made in China' more expensive than ever

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Pandemic makes 'Made in China' more expensive than ever

Original Dutch text: https://nos.nl/nieuwsuur/artikel/2367738-door-pandemie-is-made-in-china-duurder-dan-ooit.html
Original text by: Ko van der Duin


Transporting goods by sea is currently historically expensive. As a result, our furniture, electronics and other goods will increase in price. Cause: sea trade disrupted by lockdowns.


"This price increase is unprecedented", says port geographer Bart Kuipers. Before the pandemic, using a sea container cost about $ 2000 per one-way ticket from China to Europe. "Now you have to pay four or five times the amount to get your goods from China, often with delay. There are even companies that now pay 12,000 for a container.


System disrupted

To understand why this is happening, we have to go back to the beginning of the pandemic. China announced a total lockdown and all production came to a standstill. Shipping companies then took their container ships out of service and importers had to postpone their orders. "The system was disrupted," said Kuipers.


Demand for goods soared after the Chinese lockdown. Fully loaded container vessels sail to Europe and the United States. "But too few empty containers are returned to China," explains Kuipers. "Transporting empty containers is of no benefit to the shipping lines. It is therefore not profitable for carriers to take large quantities of containers without cargo with them." As a result, there is an enormous shortage of empty containers in China and the goods accumulate in the ports.


Container storage company Kramer Group is noticing the consequences. Owner André Kramer had to move a load of containers to the competitor. His own site is full of 20,000 empty containers:

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According to Kuipers, we will notice this price increase in our wallets. "Many products from China are cheap, but are now being confronted with high transport prices. In many stores we will have to pay a little extra." The prices of large goods, such as furniture, refrigerators and washing machines, will also rise, Kuipers expects.


Garden set $ 200 more expensive

Arthur Davidse's company, garden furniture wholesaler ‘Persoon’, is hit hard by the container shortage. "At least half of our garden furniture has been ready to be shipped in Asia for some time."


If goods are voluminous and therefore expensive to transport. "About thirty of a garden set go into one container. With the price increase, we pay about six thousand dollars extra. That brings you to about two hundred dollars per garden set on top of the price."


In Europe and the United States there has been a huge increase in demand for products from China. Many companies therefore take the high transport costs for granted and still have their products delivered. They'll sell their stuff anyway.


Chinese exports even grew by 21 percent in November and by 18 percent in December. Without the container shortage, those figures would have been a lot higher, says Kuipers.


According to him, the growing demand is due to a shift in what we spend our money on, from services to goods. "For example, we no longer go out for dinner, so we spend the money on new things. In addition, many people work at home, so there is a high demand for electronics."

Davidse thinks that the power play of large shipping companies also plays an important role in the price increase of containers. "It seems that the shipping companies are taking advantage of the situation."


The major shipping companies work together in three different alliances. Together they are responsible for approximately eighty percent of the turnover on the most important shipping routes. Alliances were formed because of competition amongst each other, explains port geographer Kuipers. "The shipping companies now collectively obtain a lot of capacity from the market and transport relatively few containers, with the result that their profits are enormous."


‘For now we pay extra for our goods from China.'
André Kramer, container storage company owner


Kuipers emphasizes that the shipping companies have also had very bad times. André Kramer, owner of a container storage company, also understands the shipping companies. "I agree, because they have lost billions in the past. This is the time when shipping companies can start licking their wounds, but that will not work in a few months." He thinks that shipping companies will therefore be reluctant to bring extra capacity to the market quickly, because this will be at the expense of their profit.


Davidse: "Trade from Asia can only be transported to Europe in a container. Shipping companies can now determine for themselves how high they make the prices. We are too small a player to demand a place on such a ship. They determine that "

Breather

Kuipers thinks that the Chinese New Year will provide a short respite next week. Then the economy will be completely flat for two weeks and hardly any new items will be produced, while the shipping companies will continue sailing.


According to Kramer, the owner of the container storage company, container prices will eventually fall again. "We notice at our depot that the volumes are slightly decreasing." He also sees that container prices are stabilizing. "But for now we pay extra for our stuff from China."

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