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Shipping and Shopping: why you should buy your Christmas tree early

Wednesday 27 October 2021, by Sergio Beraldo

The IFO Institute (Munich) has just revised its forecast for the German economy. GDP is now expected to grow 2.5%. IFO’s previous prediction was 3.3% and the prediction the European Commission put forward last Summer was 3.6% (Fig.1). However, according to IFO the economy will rise 5.1% in 2022 and thus bring the country back where it was before the Covid-19 shock.

IFO economist Timo Wollmershäuser explains the delayed recovery by pointing out the unexpectedly slow comeback of the manufacturing sector: production actually fell 1.3% in the second quarter of 2021, despite buoyant demand. In particular, Wollmershäuser emphasizes that German companies suffer from their failure to obtain crucial intermediate goods, which are absorbed by other industries and countries, and the supply of which cannot be increased rapidly enough.

One wonders whether the supply difficulties are going to disappear soon – as the IFO Institute suggests – or whether these difficulties signal deeper global problems. In fact, the latter view seems more realistic.

Buy your Christmas tree right now!

Water is the leading transportation mode for international freight trade worldwide. For example, according to the U.S. Department of Transportation, as far as US international freight trade is concerned, in 2020 ships moved 40.2 percent of the value (over $1.5 trillion) and 69.9 percent of the weight (1.5 billion tons).

Due to the Covid-19 pandemics, ships are often obliged to quarantine for several days before they can dock. To make things worse, China adopted a zero tolerance approach toward Covid-19. This led to the closure of some of China’s biggest cargo ports due to coronavirus. The key terminal at Ningbo-Zhoushan was one of them. The longer inbound ships wait, the longer it takes before they move out again. Congestion characterises not only Chinese ports only, however. For example, Los Angeles, one of the top 25 U.S. international freight gateways, currently sees about 70 ships waiting on the inbound side.

Now, each ship is assigned a time window for docking. If the ship misses its window, it must wait until it obtains a new one. This creates uncertainty, and the situation is likely to deteriorate as Christmas approaches and demand for import intensifies. As Jami Warner, executive director of the American Christmas Tree Association said, «If I can give one piece of advice to consumers right now, it is to find and buy their Christmas tree early».

Shipping companies.

Not surprisingly, the cost of shipping has soared. [1]

Put differently, the world badly needs more containers and expanded infrastructures. This explains why large corporations, among which IKEA and Woolmart, are planning to set up their own fleets.
As Sergio Spinosa - managing director of the X-Press Feeders, the world’s largest independent common carrier in Asia, Middle East, Central America and Europe - told IREF, there are no signs that the current situation can be settled before spring 2023. Hence, inflationary pressures are very likely to intensify and growth may slow down further, even in Germany.

https://en.irefeurope.org/Publications/Online-Articles/article/Shipping-and-Shopping-why-you-should-buy-your-Christmas-tree-early

[1The FBX is the leading international freight rate index, created in cooperation with the Baltic Exchange, and provides market rates for 40’ containers (called "forty-foot equivalent units" or FEUs). FBX calculations are based on aggregated and anonymous real-time business data from global freight carriers, freight forwarders, and shippers that use the WebCargo by Freightos freight rate management platform.

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