If you are near a railroad, evenly a train goes by and you can see many railcars carrying containers. Companies embraced containers and ships and ports were built to move goods from one country to another seemingly less expensive than to build the products in the home country. The system worked till it did not and then container prices jumped.
In an article by Irene Galea and Brent Jang, since March prices to ship containers have dropped 19% but retailers can not celebrate yet. There are still congestions in the global supply chain and changes in consumer spending.
The change in consumer spending is consumers are now spending more of their disposable income on services rather than household items.
The pictures of ships needed to be upload has decreased which is good news, however according to Drewry Shipping Consultants Ltd, a typical 40 foot container costs $7, 635, although compared to pre pandemic levels of $1,200 to $2,000 the cost is high but lower than March levels.
The war in Ukraine and the lockdown by the Chinese government of China resulted in fewer products being shipped which reduced pressure on container supply and brought prices down. That might change because the Chinese government opened up cities on June 1.
Annual trends in the industry are at play: May and June are typically the least expensive months of the year, before retailers start ordering stock for end of summer and Christmas season.
China COSCO Shipping Corp Ltd doubled its 2020 revenue to $51 billion, although costs rose to $30 billion.
Linking to dividend paying stocks, for retailers bringing in goods by containers has consider normal and many because used to using the supply system. Then it broke down and costs not expected to increase did increase which was out of control of the company. It has taken a while to adjust because it was impossible just to raise prices. When a normal everyday cost increases for a company it is important to see how it adjusts? how flexible is the company? how secure are the profits?
There are more questions than answers, till the next time – to raising questions.