June 18, 2021
Right now – depending on your geography – it costs nearly four times as much to set yourself on fire as it did just a year ago.
I’m not talking about self-immolation… I’m referring to moving house, in this case across oceans.
And that price hike covers a lot more than just moving brickbats from one house to another: Shipping is the spine of the global economy and accounts for around 90% of all trade.
In 1758, Benjamin Franklin wrote in Poor Richard’s Almanack – a trove of pithy aphorisms like “haste makes waste”– that “Three Removes is as bad as a Fire.” (Over time, we’ve whittled it down to a variation of, “Two moves in a year is worse than a fire.”)
Mr. Franklin was prematurely channeling a 2020 survey of 1,000 Americans – conducted on behalf of an American moving company – that found that moving was the single most stressful event in life. (No. 2 on the list was a breakup or divorce.) Sixty-four percent of respondents reported that their most recent move was “one of the most stressful” things they had ever experienced.
If shelling out a lot of cash is a stress accelerant for you, movers would be yanking your chain. Thanks to a complicated cocktail of factors, the price of transatlantic transporting an industry-standard 40-foot container to the northeast U.S. has more than doubled over the past year –to just over $5,000. From China, it’s tripled. From China to northern Europe, the price of shipping a container has risen nearly seven-fold – from $1,630 to just over $11,000 (by comparison: A one-way economy ticket from Beijing to New York will set you back $1,900).
Overall, the Freightos Baltic Index, a global container freight price index that measures global ship freight prices across multiple routes, has almost quadrupled since last summer. That means that getting TVs and sweaters and Instapots across oceans – from where they’re manufactured, to where they’re bought – costs a lot more… as does my move.
Moving On My Mind
I’m about to set myself on fire as – for the second time in a year – I’m moving. Last year, the family picked up house to move from Singapore to Ireland. And now, contrary to the initial plan, we’re packing up again – selling a wrong-side-of the-road car and the 220-volt electric kettle, gazing wistfully at the just-reopened pub in the local village, and fist-bumping goodbye to friends we haven’t seen all year due to lockdown restrictions – to move to Maryland (pronounced “merry land” here in Dublin).
And for the moving gold medal, it’s our second move during COVID-19. Ben Franklin perhaps could have added a pandemic caveat… “Two moves in a year during a global pandemic is worse than a fire when you’re wearing gas-soaked sweatpants while filling up the gas tank.”
On Monday, a team of burly moving guys – at least a few of whom will, I hope, have the hands of a surgeon, to safely pack away my son’s Nerf gun arsenal and my wife’s collection of Riedel wine glasses – will be descending on the house. According to the American Moving & Storage Association, around one-third of moves each year involve professional movers – with the remainder involving something between “man with a van,” and bribing your twenty closest friends with pizza to get them to cart carloads of your stuff across town.
According to the survey of moving Americans that I mentioned earlier, the most stress-inducing parts of a move are packing and playing Marie Kondo to figure out whether to keep your 5th-grade math tests or donate them to the local dumpster. And not surprisingly – given the survey’s sponsor – a North Korean election-like 94 percent of respondents who used packers and a moving company for their most recent move reported that it was worth it.
In the five years ended in 2020, around 40 million Americans – about 13% of the population – moved each year, according to the Joint Center for Housing Studies of Harvard University. Nearly two-thirds of those moves were in-county, with another 17% in-state (but outside the county). Just 4% of moves were international, with local moves mostly motivated by housing while longer-distance relocations were job-related.
Meet the Hero of Global Trade
Once we pack our stuff in boxes and crates, it finds a fleeting home inside a 40-foot shipping container. That’s a big rectangular steel box with doors that can hold 2,390 cubic feet (67.7 cubic meters) of stuff… which can generally contain the contents of a standard 3–4-bedroom American home.
Put in other terms, it’s enough space for around 160 oil barrels or about 12,000 shoeboxes. It’s twice the space of the smallest legal apartment in San Francisco. Around 37 of these containers would fit into an Olympic-sized swimming pool.
Then, the container will be loaded onto a ship designed to carry close to 22,000 TEUs, or twenty-foot equivalent units, which is (go figure) half the size of a 40-foot container. The Ever Given, the ship that clogged the Suez Canal in March for six days, has a capacity of just over 20,000 TEUs. That’s equivalent to a bit more than half the total volume of the Houston Astrodome – or 100 times the Goodyear Blimp.
Household goods, though, account for a tiny fraction of total containers. It used to be that [here I’m trying to say that in the past, all stuff was transported the old way (breakbulk)] those goods – a box of my high school yearbooks, or any commercial products from bottles of wine to bananas to radios to fabric – were transported via a system called breakbulk cargo. That means items handled and stowed individually or in containers or boxes that the sender had onto a cargo ship.
Then, in 1956, an American trucking entrepreneur named Malcolm McLean came up with the clever idea of using standardized containers to transport goods. That way, a bunch of discrete items (usually owned by the same person and going to the same place) are kept together and tracked as a single thing. And those items they could then load onto a truck or railcar (called “intermodal,” or involving different modes of transport), or another ship, relatively quickly and easily.
It took years to get the different parts of the transportation infrastructure to fall into line. The way that the government regulates the transportation of goods had to dramatically change. And the operations of ports, and the entire maritime industry, experienced a Godzilla-to-Cinderella makeover as part of the adoption of containers.
But it was worth it. As legendary management consultant Peter Drucker explained in 2007 about containers…
“There was not much new technology involved in the idea of moving a truck body off its wheels and onto a cargo vessel . . . But this humdrum innovation roughly quadrupled the productivity of the ocean-going freighter. . . Without it, the tremendous expansion of world trade in the last forty years – the fastest growth in any major economic activity ever recorded – could not possibly have taken place.”
According to The Box, a 2006 book about the evolution and impact of the container, early container ships required just one-sixth the time to load and unload than previous cargo ships – and one-third the labor. Subsequent efficiencies further improved on this significantly.
Federal Reserve Bank of St. Louis research Alexander Monge-Naranjo points to “the pervasive adoption of containers and corresponding infrastructure eventually led to drastic reductions in the cost of transporting goods” as one of the two key factors behind the explosion in global trade and globalization. He cites containers – along with the shift in most countries from protectionist trade policies to more market-friendly approaches – as critical to the increase by a factor of 65 in world exports between 1970 and 2018, and the more than doubling of internationally traded goods and services as a percentage of GDP during that period.
It’s a big deal and a warning sign when a service that’s a linchpin of the global economy – like shipping containers across oceans – rises in price within the space of just a year by four times.
In some ways, it’s a function of the sharp economic recovery in the U.S. and elsewhere, which has accelerated demand for everything from PlayStations to mozzarella to lumber to anything (phones, cars, watches… and almost anything electronic) with computer chips. Around 90% of everything imported to the U.S. – that was $274 billion worth of goods in April alone – is brought in by ship, on containers.
And now, there are shortages in the U.S. of… all of it. “How the World Ran Out of Everything” headlined a June 1 article in the New York Times, as COVID-19 stimulus cash meets the “treat yourself” post-lockdown mentality.
But it’s also because “everything” hasn’t been getting to shop (or warehouse) shelves. And some of that comes down to containers. The number of available containers – unlike demand for containers – can’t increase overnight. Or better put – container capacity in the right place can’t increase immediately. Like any transportation – the Uber taking you out to dinner, the Amtrak shuttling people up to Boston, a charter flight from Oshkosh to Cancun – containers are empty after they drop off their cargo.
And that’s a problem if cargo is traveling mostly in one direction. Over the first four months of 2021, the U.S. imported $151 billion worth of goods from China… while the U.S. exported less than one-third of that sum. While not all of that – but the vast majority of it – was in containers, it sums up to a lot of empty containers going back to China.
As a result, it now costs six times more for an East Coast U.S.-bound container from China than the other way around, according to Freightos indices. And it’s almost seven times more from China to northern Europe than the return trip.
Also pushing up prices is a smaller ship inventory. When the global economy went into hibernation last year, vessels taken offline can’t just be dusted off and sent back out to sea. And then there’s the global shortage of people – as in many other industries – to crew those ships, too.
Home improvement retailer Home Depot – the third-largest importer into the U.S. by ocean container volume – is tackling transportation issues by moving upstream: contracting its own ship to transport goods. That will be a lot less flexible but will cut out middle-man shippers. And when the boss wants to find out where the status of the next shipment of lumber or screws or power drills, he can dial an internal extension – rather than yell at the shipping company.
The wealth gap in America has never been wider — we’ve still never fully recovered from the Great Recession of 2008, and it’s only going to get worse from here. But the effects of the Big Con are going to devastate those who don’t take action. So do something now while you still can.
Beware of Lying Shippers… and Inflation
According to recent reports, a COVID-19 outbreak at Yantian port, which services Shenzhen, also holds things up and contributing to backlogs. But it seems odd that this panic (in COVID-19-beating China, no less) would be a factor in higher prices now – and not a year ago.
I checked in with a guy here in Dublin who lives and breathes this because he runs a moving company – and is also a veteran of the shipping industry.
“Sometimes [shippers] don’t tell the truth,” he told me. “One time someone told me that tides were slowing down a shipment that I was expecting… and I thought, what do you take me for?” Another crowd-pleasing lie that shippers tell, he told me: The wind was too strong for the cranes to lift containers onto or off of the ship.
(And what about one of the explanations offered for the Ever Given clogging the Suez Canal – that a big gust of wind pushed it into the bank? “Doesn’t make sense to me,” he said. “Do you have any idea how much these ships weigh? A gust of wind?”)
But whatever the cause… shipping stuff – whether it’s an iPad from China or my stamp collection from here in Dublin – is a lot more expensive than it was. And that’s only going to further fuel inflation, which is one of the biggest threats to investors everywhere today.
I’m not sure if you remember books, America, but it’s what people used to sink their faces into to avoid dealing with family and strangers. Our editor-in-chief, P.J. O’Rourke, has written a few in his time, and he’s re-releasing his bestselling Eat the Rich, complete with a new chapter to take on the absurdity of 2021 economics. And as an American Consequences subscriber, you can have access to the newly released edition for free! Claim Your Copy Now.
No Fires Here
Moving is like a root canal – it’s unpleasant, but once you know what to expect roughly, it’s not so stressful or so terrible. I’ve moved upwards of forty times… around half of those moves involving ocean-going containers. And my stuff has always made it over, though that’s not always the case.
Fingers crossed – like I always do – that I’m not setting the house on fire this time, either.
Love us? Hate us? Let us know how we’re doing at [email protected].
June 18, 2021
The post The Price of Moving: Shipping Containers & Setting The House on Fire appeared first on American Consequences.
Click this link for the original source of this article.
Author: <a href="https://americanconsequences.com/byline/kim-iskyan/" rel="tag">Kim Iskyan</a>
This content is courtesy of, and owned and copyrighted by, https://americanconsequences.com and its author. This content is made available by use of the public RSS feed offered by the host site and is used for educational purposes only. If you are the author or represent the host site and would like this content removed now and in the future, please contact USSANews.com using the email address in the Contact page found in the website menu.