The prices of maritime shipments from China to the United States have increased significantly, reaching up to 300% on some routes, severely affecting American importers, especially those handling low-value cargo. To understand this situation, we summarize the four main causes that have generated these increases and created nervousness and instability in the US businesses dependent on imports from China.
Increase in Demand
In the first quarter of 2024, demand reached record levels, surpassing the same period in 2023 by nearly 10%. During 2023, maximum inventories generated by the pandemic were reduced, creating the possibility of available capacity to accelerate shipments before the peak season. This ensures inventories, considering that it is better to have high inventories than late arrivals of goods. Shipping companies can take advantage of this opportunity to increase prices by advancing additional volumes in the spot market.
Situation in the Red Sea
The crisis in the Red Sea, resulting from Houthi rebel attacks on cargo ships and tankers, is causing hundreds of vessels to avoid the Suez Canal, one of the world's most important waterways. Instead, these vessels are being forced to reroute around southern Africa, adding 4,000 miles to each journey, significantly increasing transport times and freight costs. This detour equates to a 30% increase in transit times, implying an approximate 9% reduction in effective global container shipping capacity.
Restrictions in the Panama Canal
Despite being in the process of easing restrictions imposed due to last year's severe drought, ship traffic in the canal has not yet reached pre-restriction levels. In June, average daily transits increased by 27.9% from their lowest point in January, but are still 20.3% below the same month in 2022. The initial restrictions, which began in November 2023, particularly affected Neopanamax ships, vital for trade between Asia and the US
Escalation in the Trade War between the U.S. and China
In May, President Biden announced steep tariff increases on a range of Chinese imports, including electric vehicle batteries, computer chips, and medical products, risking an election-year standoff with Beijing. China responded by promising retaliation and announcing that it would take measures to defend its interests. Biden will maintain the tariffs implemented by his predecessor, President Trump, while increasing others, including quadrupling tariffs on electric vehicles to over 100% and doubling semiconductor tariffs to 50%. The new measures affect $18 billion in imported Chinese goods, including steel and aluminum, semiconductors, electric vehicles, critical minerals, solar cells, and cranes.
These four causes combined have contributed to an environment of nervousness and instability in the market, affecting American businesses that rely on Chinese imports.
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