Executive Briefings

Rising Shipping Costs Could Sink China's Exports

On land, high oil prices have ended America's love affair with sport-utility vehicles, forcing carmakers to revamp their product line-ups. In the air, sky-high fuel costs have prompted airlines to raise ticket prices and cut routes. What about at sea? Could rising shipping costs scupper China's export boom?
This question has been much discussed since Jeff Rubin and Benjamin Tal of CIBC, a Canadian bank, issued a memo a few weeks ago saying that a reversal of the great migration of manufacturing operations to China might already be under way. The cost of shipping a standard 40-foot container from Shanghai to America's east coast, for example, has jumped from $3,000 in 2000 to about $8,000 today. The extra cost of transporting goods halfway around the world, Messrs Rubin and Tal wrote, is wiping out the often-slim margins of Chinese exporters. What is more, if oil and shipping prices stay high, many Western companies that now outsource their manufacturing to China might decide that it makes more sense to shift production closer to their customers at home.
Visit: www.economist.com

On land, high oil prices have ended America's love affair with sport-utility vehicles, forcing carmakers to revamp their product line-ups. In the air, sky-high fuel costs have prompted airlines to raise ticket prices and cut routes. What about at sea? Could rising shipping costs scupper China's export boom?
This question has been much discussed since Jeff Rubin and Benjamin Tal of CIBC, a Canadian bank, issued a memo a few weeks ago saying that a reversal of the great migration of manufacturing operations to China might already be under way. The cost of shipping a standard 40-foot container from Shanghai to America's east coast, for example, has jumped from $3,000 in 2000 to about $8,000 today. The extra cost of transporting goods halfway around the world, Messrs Rubin and Tal wrote, is wiping out the often-slim margins of Chinese exporters. What is more, if oil and shipping prices stay high, many Western companies that now outsource their manufacturing to China might decide that it makes more sense to shift production closer to their customers at home.
Visit: www.economist.com