Current shipping costs = 9% trade tariff

I noted in June that P&G were reviewing their global supply chain strategy, as a result of higher oil prices. Now a study by Canadian Bank CIBC suggests the rise in shipping costs equals a ‘9% tariff on trade’, adding that ‘the cost of moving goods, not the cost of tariffs’ is now the ‘largest barrier to global trade’.

Chemical companies have pioneered globalisation over the past 20 years. But the cost of shipping a 40 foot container from Shanghai to the US has more than doubled in recent years, from $3k to $8k. Ships are also travelling slower, to reduce fuel costs. Whilst consumers worry about the carbon footprint caused by global product movements.

Unlike gasoline, which is generally produced for local use, most chemicals made in Asia are actually consumed in the West. So although any move to repatriate production would take years to fully implement, the impact on exporting countries could be large. Currently high Asian growth rates could reduce substantially – by some estimates, for example, 80% of Guangdong’s GDP is actually export-related.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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