Why the Cost of Shipping Goods From China Is Suddenly Soaring

Tracy Alloway (0:11)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:16)

And I'm Joe Weisenthal.

Tracy Alloway (0:18)

So Joe, I have something to admit to you.

Joe Weisenthal (0:21)

Oh boy, here we go. Okay.

Tracy Alloway (0:25)

I'm worried you're gonna think less of me.

Joe Weisenthal (0:27)

There's no chance of that, just tell me, Tracy.

Tracy Alloway (0:29)

So one of my long-held ambitions in life is to travel via container ship, preferably a long journey across the Pacific.

Joe Weisenthal (0:40)

Yeah.

I think I know someone who did that. I think I know someone who went from Japan to the US as a traveler on a industrial container ship.

Tracy Alloway (0:53)

Yeah, it's something you can do, or I should say you were able to do it before the global pandemic. I'm sure it's not allowed right now for many reasons.

Obviously you have restrictions on travel, you have border restrictions, but the other big reason is that global shipping is kind of just a mess at the moment.

Joe Weisenthal (1:13)

Right, and that's related to the pandemic and the supply chain disruptions, and of course they've been happening for about a year now, but they don't seem to be abating, like the general disruptions that we've seen. I mean, the world seems to be getting by and maybe we haven't had as severe shortages of things as we might have feared last spring, but there are still all kinds of reports about how sort of messed up everything is.

Tracy Alloway (1:42)

Yeah, and I think people were expecting it to get better. So as you mentioned, when the pandemic first started, we saw a bunch of countries suddenly close their borders, and this meant that ships that were supposed to head somewhere and then head somewhere else were all sort of knocked out of place. So it takes a long time to get them back into position and to get them on the routes that they're supposed to be going.

But now what we're seeing is that even, almost a year on from the start of the pandemic, at least in China, this problem seems to be getting worse. And I'm looking at a headline on Bloomberg right now saying that surging shipping rates are a new headwind for the global economy. So it's gotten so bad that we could actually feel an outsized economic impact from all of this.

Joe Weisenthal (2:34)

Yeah, you know, it's funny, like when the crisis first hit, there was a lot of talk here in the US about, oh, are we gonna start reshoring more of our manufacturing? Are we gonna buy less from China over time? And maybe that'll happen at some point, who knows?

But in the meantime, people are spending a lot on e-commerce, they're buying things, they're buying things from walmart.com and amazon.com, and a lot of those things come from China. So there is an extraordinary amount of demand for imports shipped from China. I don't think there's as much going in the other direction. And I think that's sort of like part of the story, is that although there has been this revival of economic activity, it's not the same patterns as it was before.

And so this sort of like equilibrium stability of global supply lines has not been established yet.

Tracy Alloway (3:28)

No, that's exactly right. I think I saw some anecdote about how it's cheaper to send a container from the US to China empty. So you ship something over to the US, a full container, but then when it gets there, you just send it back empty because you can make more money by making more trips versus actually spending the time to load it up in the US.

So it's stuff like that. Well, anyway.

Joe Weisenthal (3:54)

That's a good one. That's a good one.

Tracy Alloway (3:55)

On this podcast, we're going to hit all of these big themes. So we're going to hit how shipping actually works, what's going on now. And when we say stuff like the rate on a standard container has quadrupled versus a year ago, what do we actually mean by a standard container? And how did we get into a place where shipping and global trade was standardized in this way? So we're going to talk to someone who has actually fulfilled my ambition in life, someone who has traveled on container ship.

We're going to talk to Marc Levinson. He's an economist and a historian and the author of a really good book that I read quite a few years ago, but it's called The Box, How the Shipping Container Made the World Smaller and the World Economy Bigger.