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Why Do Global Shipping Costs Continue to Skyrocket?

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Archives, Global Trade Daily, Ocean Ports

Why Do Global Shipping Costs Continue to Skyrocket?

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Global shipping costs are reaching rarely seen levels, putting strain on logistics teams and product purchasers alike. Here’s a closer look at some of the reasons for this phenomenon.

Worsening Container Delays Create Bidding Wars

Port backups were among the issues of the early days of the COVID-19 pandemic. Unfortunately, they persist now, limiting the number of containers each port can efficiently accommodate. Relatedly, the shipping customers outpace the available space in each container. That problem makes prices rise so high that some entities lose out because they cannot afford to pay them.

Port Backups Cause Headaches

Some port backups are so severe that ships arrive unable to dock. That’s an ongoing situation at Washington State ports in Tacoma and Seattle. U.S. Coast Guard representatives helped redirect some vessels as they waited days or weeks to unload. Some ended up in unusual locations, such as off the Puget Sound. The offloading delays also cause a container shortage that affects new freight.

HMM, South Korea’s top national container carrier, recently reported severe vessel berthing congestion at most of its port calls, as well as related yard and gate issues. Other providers reported similar disruptions. However, the affected parties disagree about what’s to blame. The carriers often assert that ports are not sufficiently well-managed, which causes the delays. But port managers respond that carriers have not met their berthing window requirements.

Bids Can Reach the Tens of Thousands of Dollars

In any case, these slowdowns have made it exceptionally challenging to keep goods moving. Desperation makes some parties engage in bidding wars.

Philip Damas, head of the supply chain advisors practice at Drewry, a maritime research consultancy, explained, “Everyone is spending much longer on round trips. Containers are sitting on the water for much longer periods of time, containers are waiting at ports for much longer. Productivity in container shipping is deteriorating. Every failure is effectively creating ripple effects. It’s a vicious cycle.”

He continued by clarifying that freight indexes that track the changes in shipping costs usually gather the associated spot booking prices that get offered about a week before a ship departs. However, some ocean carriers offer available slots in shorter timeframes once the vessels are already at terminals. By then, there are plenty of customers eager to get goods on board at the last minute.

“Now everything is overbooked,” Damas said. “Shippers are desperate to book tomorrow. It’s more a bidding war than it is a traditional tariff, and this bidding war is accelerating. Some of these $23,000, $24,000 prices include the inland distribution cost, and that can easily add far more to the final cost.”

A combination of factors means many shippers decide there’s no choice but to pay those high prices. One longstanding issue is that carriers have cut capacity on major routes. Plus, the container shortage caused by backups escalates the problem. Shippers often realize they have to pay higher prices or leave the overseas markets.

Increased Demand From Customers Exacerbates the Issue

Company leaders usually appreciate when their products are in high demand, but the matter becomes more complicated when shipping costs are so high. In such cases, it’s necessary to either invest massive amounts of money to alleviate the shipping struggles or face lengthy delays that could upset customers.

For example, Amazon manages its own logistics system with extraordinary efficiency. However, that decision means building huge distribution centers as close as possible to the people who place orders. The company even began purchasing jets in early 2021 to exert more control over its air shipping options. However, most other brands don’t have such gigantic resources. Plus, the strategy may not pay off forever.

In the second quarter of 2020, Amazon showed a 68% increase in money spent on shipping. The e-commerce giant has yet to raise shipping costs for consumers, but other brands have already taken that approach. The rise in global shipping costs could even cause long-term stock shortages.

A Luggage Brand Goes to Great Lengths to Receive Goods

In one case, a global luggage company usually receives 11 container deliveries annually by August. That scheduling gets the goods to the merchant in time for the holidays. But, this year, it has only received three of the 11 so far, and not without significant expense.

The company normally pays $2,500 per 40-foot container. But representatives got an offer from an entity promising to get the container onto a ship in Thailand for $15,000. However, people at the company had to first get the goods to the vessel from Myanmar — a challenge in itself due to a trucking shortage affecting Asia. The brand eventually secured the necessary trucking assistance for $3,000.

In the end, the brand paid $18,000 to have its goods shipped. This example shows how much the global shipping crisis can quickly eat into profits. Another downside is that the container’s goods had a $30,000 value, so sending them cost more than half that amount.

The company reported that consumer demand was up, which is usually a positive thing. It’s probably in large part because of how people are starting to travel for pleasure more with the air travel industry beginning to recover and offer more routes.

Fewer Overall Affordable and Available Transport Options

A lack of choices to move goods also contributes to soaring global shipping costs. Some parties may get their products shipped by train and air when possible, but capacity limits exist there, too. The rush to get goods shipped causes a crunch that requires scrambling for any available slots offered via any kind of transit. Plus, air shipments are much costlier than those sent by sea, with some estimates saying that method is at least five times more expensive.

Severe weather can wreak havoc, too. In July 2021, a typhoon hit China and closed the country’s air, sea, and rail hubs. Earlier in the year, snowstorms forced some rail freight operators to temporarily cease running some routes. These challenges mean some customers decide they must cope with the tremendous shipping costs because there aren’t many other viable options.

Some brands are also trying to cope with delays within the supply chain by making up time at other points. One way to do that is with drones. Supermarket chain Tesco carried out a trial where some customers in Ireland received grocery orders only 200 seconds after the goods departed the store property.

In another instance, DHL partnered with a cargo drone company. The agreement involves using and managing several thousand drones to give customers same-day deliveries. Drone deliveries are not yet widespread options. However, they could become more popular, particularly as shipping professionals look for feasible ways to cut costs while keeping customers happy.

No Short-Term Price Easing

Analysts believe the global shipping costs will not return to more manageable levels during 2021. There are certainly not any quick fixes to the problem. Thus, the parties affected by it must decide on the most appropriate ways to deal with it, even if that means accepting astronomical prices or restructuring supply chains to avoid long-distance shipments as much as possible.

_____________________________________________________________

Emily Newton is an industrial journalist. As Editor-in-Chief of Revolutionized, she regularly covers how technology is changing the industry.

electronics
Archives, Global Trade Daily, News

Consumer Electronics Market Revenue to Hit $1500 Bn by 2027

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Consumer electronics market size is estimated to exceed USD 1.5 trillion by 2027, according to a new report by Global Market Insights, Inc. Amid the tremendous shifts in the technological domain, consumer electronics companies across the globe are focusing on introducing new and attractive features to the widely used devices like smartphones, laptops, computers, cameras, televisions, speakers, etc. It has become more important than ever for the companies operating in the consumer electronics market to seek new ways to innovate their products to reach a large consumer base.

The industry has embraced disruptive technologies such as the Internet of Things, artificial intelligence, and machine learning which in turn is impelling the application of consumer electronics. In addition to this, the proliferation of wireless technologies such as Near Field Communication (NFC), Bluetooth, and Wi-Fi is further supporting product adoption, subsequently leading to industrial growth.

Following pivotal trends:

Innovative product launches by market players

Manufacturers active in the consumer electronics industry are mainly focusing on product innovations in order to gain a competitive edge which itself is paving way for enormous growth opportunities for the market. Quoting an instance, in 2021, Canon revealed its plans to roll out the XF505 video camera later in 2021. According to the company, this camera will be equipped with a variety of features including an integrated zoom lens with 15x zoom, one-inch image sensors, and intelligent battery system BP-A batteries.

The growing popularity of audio and video equipment

With the emergence of multimedia and incorporation of various smart technologies, audio and video equipment such as televisions, digital cameras, speakers, players, remote controls, headsets, etc., are gaining massive traction across the globe. Speaking of television, its technology landscape has enormously transformed in recent years with the advent of smart TVs. These TVs are generally equipped with a wide range of exciting features like browsing the web and social media, online streaming, smartphone connectivity, motion control, voice control, games, and applications. Growing consumer preference for such devices coupled with increased spending capacity is impelling their demand to a great extent.

Increasing demand for household appliances

Significant growth in the residential sector globally, in conjunction with increasing disposable incomes, has strongly influenced the demand for small household appliances such as microwave ovens and mixers. Other kitchen appliances such as dishwashers and smart coffee makers are also witnessing a mounting demand on account of changing lifestyles in urban areas. According to the U.S. Census Bureau, exports of household and kitchen appliances in the U.S. increased to USD 603 million in May from USD 602.44 million in April 2021.

A strong presence of major technology companies in North America

The outlook of the consumer electronics industry in North America has been bolstered by the heightened demand for smart household appliances and mainly by the strong presence of major technology companies like Google, Apple, Amazon, and General Electric. These companies are involved in rigorous R&D and are making hefty investments for the same. To illustrate, credible sources have reported that tech giant Apple Inc is working on a new product line that combines Apple TV set-top box and a HomePod speaker as well as a camera for video conferencing. This product is expected to be one of the most powerful smart home devices by the company.

Source: Global Market Insights, Inc

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Archives, Global Trade Daily, International Trade

China Will Continue to Be a Major Contributor to Global Trade Growth in 2022

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Despite the twin impacts of the pandemic and the US-China trade war, economic indicators suggest that China will continue to grow rapidly through the next year and will be one of the biggest contributors to global trade growth in 2022. 

Indeed, in some ways, the current trajectory of China’s economic growth and trade surplus – both highly positive – is a return to normal. Though many feared that the pandemic and the US trade war would cause long-term, structural damage to China’s trading and economic infrastructure, it appears that this was not the case. In fact, changes to the way supply chains work may mean that China is now in a stronger position than it was at the beginning of the pandemic – a luxury that other countries can only dream of.

In this article, we’ll look at the most recent economic indications from China, explain what they mean for global trade, and see how analysts and governments in the West are responding to these signs.

Positive indications

First, let’s look at the state of the Chinese economy. Here, the news is very positive. On almost any measure that is commonly used as a proxy for consumer demand – the Purchasing Managers’ Indexes (PMI), electricity consumption, bank lending, etc. – the Chinese economy is booming. 

Though many analysts expected that consumer demand would be significantly down in 2021, in actuality, China is experiencing strong demand in both domestic and foreign markets. The Chinese government continues to invest heavily in making China a tech superpower, and so far, they are mostly succeeding. 

There are some complexities hidden behind this headline, though. One is that China has seen heavy food price inflation over the past few months driven, in part, by the US-China trade war. For many households in the country, food makes up a sizable proportion of the household budget. 

On the other hand, it seems that the pandemic has not affected the Chinese economy to anywhere near the degree that some experts expected. The transition to remote working for office workers, for instance, went more smoothly than had been predicted and occurred without a net loss to the economy. This was the case in some other countries too – remote workers contributed $1.2 trillion to the US economy alone last year, a 22% increase from 2019 – but it was especially pronounced in China.

 

Increased foreign trade

Since both domestic and foreign demand for Chinese goods remains high, we are likely to see China’s share of global trade increase over the next year. This is also a continuation of the pre-pandemic trend, which saw gradually increasing volumes of high-value finished goods being exported from China.

When it comes to global trade volumes, the picture is not completely positive, however. Though demand for Chinese goods remains high, the pandemic has imposed new restrictions and complexities on exporters. This is likely to slightly reduce trading volumes over the next year. That said, China is already a titan when it comes to global trade, and a slight reduction in growth is not likely to affect that. 

Liang Ming of the Chinese Academy of International Trade and Economic Cooperation predicted that the country’s total foreign trade will be near five and a half trillion by the end of 2021. In fact, since that prediction was made, market conditions have only grown more positive for Chinese exporters. 

Many manufacturers in the country have used enforced lockdown periods to update and improve their logistics and supply chains for the post-Covid world, and many of their trading partners have come out of the pandemic more quickly than expected. 

Calls for decoupling

All this is great news for China, and specifically for Chinese exporters. It might not be such good news, however, for the countries that buy goods from China. This includes the US and the majority of European nations, all of whom are heavy consumers of Chinese-made goods. Many analysts are alarmed at the growing dominance of China in global trade, pointing out that this could be dangerous for the world’s privacy and safety.

The numbers are certainly impressive. Official data released from the Chinese government in July 2021 showed that for the first half of the year the country’s foreign trade surged to 18.07 trillion yuan, equal to roughly $2.79 trillion USD. This was despite many industries being affected by the US trade war and despite calls in the US for the country to transition away from its dependence on China.

There are other concerns about granting China a larger portion of the global economy. Specifically, concerns about the privacy of data collected by Chinese companies remain high, as do concerns that Chinese banks are being used to launder money on behalf of Mexican and Colombian drug cartels.

All of these concerns have led some think tanks to call for a “decoupling” from the Chinese economy. This would involve selected trade embargos in order to promote domestic production of consumer items in Western economies and to give these economies time to make back some of the gap that is opening in global trade.

Conclusion

Ultimately, the trajectory that China now finds itself on – with a growing economy and a rapidly increasing trade surplus – has been the norm for much of the last two decades. And if a global pandemic and a US-directed trade war has been unable to stop the growth of the Chinese share of global trade, it’s unlikely that anything will. 

usmca
Archives, Banking on Global Trade, Foreign Trade Zones, International Trade

Optimism for Growth in 2021 is Uneven in the USMCA Region

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The past year and the ensuing Covid-19 recession has created a time of uncertainty and instability for economies throughout the world, and especially in the USMCA region, according to a recent Payment Practices Barometer survey from trade credit insurer Atradius.

The most telling data gathered in the region concerns business confidence, where survey results were drastically different in Mexico, Canada and the U.S. The majority of survey respondents in Mexico expect to see an improvement in business performance over the coming months, while in Canada, this picture is reversed with only a minority expressing optimism. The U.S. falls somewhere in the middle.

More than half of all sales transacted on credit

Of the total value of all B2B sales in the USMCA region, 53% were made using trade credit last year. This represents growth, as 44% of businesses told us that they increased the use of trade credit in the months following the pandemic.

Temporary fiscal packages in the U.S. and Canada have helped struggling businesses in the short term. As these are withdrawn in the coming months, we are likely to see a rise in insolvencies.

In this environment of heightened risk, it is important that businesses continually monitor the financial health of their customers and note any early warning signs of insolvency. Some of those signs may include slower payments or late payments. However, it should be taken into consideration that the pandemic has presented additional strain on the supply chain that is often out of any one company’s control, leading to slower payments.

Credit management costs rise sharply

Businesses throughout the USMCA region have reported a rise in the cost of managing their accounts receivable in the months following the Covid-19 outbreak. The sharpest rises were reported by businesses that managed credit and collections in-house.

In part, this rise can be attributed to an increase in the percentage of sales made on credit; simply a greater number of credit sales requires more resources to manage them. However, this may also be an indicator of a deteriorating risk environment, as the longer an invoice remains unpaid, the more resources it takes to collect on it.

For businesses that do not use trade credit insurance or an invoice collection service such as factoring, rising payment delays equate to rising costs. Businesses that do outsource credit management to such services enjoy the certainty that their invoice will be paid and that management costs will not escalate.

Businesses favor domestic markets for credit sales

The USMCA region saw many more domestic credit sales than foreign credit sales in the year following the outbreak of the pandemic, with a 60/40 split in favor of domestic customers. This could have been caused by the supply chain challenges that followed the Covid-19 pandemic, leading to concerns over offering credit to foreign customers.

Businesses outside of the USMCA region should approach trade in the region with optimism. While it is clear that the Covid-19 pandemic is not over, the region is rebounding as expected. If there’s one thing that businesses around the world have learned is that offering more flexibility within their supply chains can help tremendously in the face of unexpected events like the Suez Canal blockage, where its effects were compounded by the pandemic’s supply chain disruptions. Companies that diversify their customer base will be better prepared to capitalize on opportunities should their competitors face unexpected disruptions to their supply chain.

Uneven outlooks for growth

On average, most businesses across the region are positive in their outlook and expect to see improvement in the second half of 2021. Upon a closer examination, a country-by-country comparison reveals a vastly different picture. In Mexico, 81% of businesses surveyed anticipate growth, while 36% of businesses in Canada hold the same view. Businesses in the U.S. fall about halfway between these poles. However, it should be taken into consideration that each country in the USMCA all started from very different places before the pandemic, making their perceptions of recovery different.

Businesses in Mexico were experiencing a recession long before the COVID-19 pandemic and received limited financial support from their government over the past year and a half. In contrast, both the U.S. and Canada started from a stronger economic position going into the pandemic and have received substantial financial help from their governments to stay afloat.

Businesses in both Canada and the U.S. may be bracing themselves for the removal of government fiscal support as well, which will have a much greater impact on their business than those in Mexico who are used to the lack of government support and ready for a rebound.

Post-recession growth is predicted for all of the countries in the USMCA region. It will be interesting to see which businesses thrive and grow during this period and whether the optimism and pessimism expressed by the survey respondents comes to pass over the next year.

______________________________________________________________________

Aaron Rutstein is the Vice President – Regional Director, Risk Services – Americas at Atradius

coffee
Archives, Global Trade Daily, Imports/Exports

Coffee Prices Jump to Seven-Year Highs Due to Brazilian Frosts

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IndexBox has just published a new report: ‘World – Coffee (Green) – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

Global prices for coffee have skyrocketed to a seven-year high, driven by fears of a significant reduction in production in Brazil due to freezes and the depletion of global stocks. Further growth in prices for the product will be stimulated by the reduction in production in other leading supplying countries such as Honduras and Indonesia, coupled with increased freight costs. A decrease in coffee production will lead to a fall in global exports by -4% y-o-y, which could lead to local imbalances in supply and demand and drive up consumer prices in key European and American markets.

Key Trends and Insights

Due to an expected reduction in coffee stocks following the fall of production in Brazil, prices on the global coffee market have skyrocketed in the middle of the current year. Futures in Arabica on the ICE exchange in July 2021 exceeded $2 per pound for the first time in seven years.

Abnormal freezes in the Brazilian states of São-Paolo, Paraná, and Minas Gerais in July this year damaged more than 200K hectares and will affect plantation yields. As a result, coffee production according to USDA estimates may decline by -30% y-o-y to 2.2M tonnes by the end of 2021. Labor shortages related to the pandemic, logistical difficulties and the rise of freight costs are further deterring supply and stimulating the price increases.

Brazil remains the leading supplier of green coffee with 29.3% of global exports. Following that is Vietnam (17.2%), Colombia (10.3%), Honduras (5.2%) and Indonesia (3.4%). Global coffee exports will fall by -4% y-o-y to 16.6M tonnes in 2021 owing primarily to the reduction in supplies from Brazil.

According to IndexBox estimates, based on USDA data, the production of Arabica coffee in Vietnam will rise by +15% y-o-y in the current year and the production of Robusta will contract by -2% y-o-y. In Colombia, coffee production will maintain its 2020 levels. Production in Honduras and Indonesia is expected to decline by -12% y-o-y and –2% y-o-y respectively. The expected drop in global coffee production by -6% y-o-y to 9.8M tonnes amidst an increase in demand by +1% y-o-y this year will lead to a reduction in world stocks and further increases in price.

The import of green coffee into the EU should fall by -5% y-o-y up to 2.9M tonnes due to the decrease in crop fields in the primary supplier countries of Brazil and Honduras. In the U.S. a less severe drop in imports is expected – by -1% y-o-y to 4.2M tonnes since a significant part of coffee beans comes from countries with stable crop yields during the current year, such as Vietnam and Colombia. A reduction in coffee stocks can lead to imbalances of supply and demand that will threaten the growth of consumer prices for the drink in retail and food services.

Global Coffee Production

In 2020, approx. 10M tonnes of coffee (green) were produced worldwide; surging by 1.8% compared with the previous year. The total output volume increased at an average annual rate of +1.3% over the period from 2012 to 2020. In value terms, green coffee production rose markedly to $27.7B in 2020 estimated in export prices.

The countries with the highest volumes of green coffee production in 2020 were Brazil (3.1M tonnes), Viet Nam (1.7M tonnes) and Colombia (897K tonnes), with a combined 55% share of global production. These countries were followed by Indonesia, Ethiopia, Honduras, Peru, India, Uganda, Guatemala, Lao People’s Democratic Republic, Nicaragua and Mexico, which together accounted for a further 33%.

Coffee Exports by Country

After two years of growth, overseas shipments of coffee (green) decreased by -6.5% to 6.8M tonnes in 2020. In value terms, green coffee exports fell to $17.3B (IndexBox estimates) in 2020.

In 2020, Brazil (2.4M tonnes) was the largest exporter of coffee (green), mixing up 35% of total exports. It was distantly followed by Viet Nam (1,208K tonnes), Colombia (599K tonnes) and Indonesia (376K tonnes), together committing a 32% share of total exports. The following exporters – Honduras (305K tonnes), Germany (210K tonnes), India (206K tonnes), Uganda (205K tonnes), Guatemala (190K tonnes), Ethiopia (175K tonnes), Peru (172K tonnes) and Nicaragua (128K tonnes) – together made up 23% of total exports.

In value terms, Brazil ($5B) remains the largest green coffee supplier worldwide, comprising 29% of global exports. The second position in the ranking was occupied by Colombia ($2.4B), with a 14% share of global exports. It was followed by Viet Nam, with a 11% share.

In 2020, the average green coffee export price amounted to $2,531 per tonne, increasing by 4% against the previous year. From 2012 to 2020, the most notable rate of growth in terms of prices was attained by Peru, while the other global leaders experienced a decline in the export price figures.

Source: IndexBox Platform

automate
Archives, Global Trade Daily, Imports/Exports

AUTOMATE TO SLASH TARIFF MISCLASSIFICATIONS, PENALTIES AND DELAYS

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A Fortune 500 chemicals company experienced surges in its tariff classification requests and predicted future volume would be even greater. Without support, the risk of misclassifying items was extremely high. Procuring an automated global trade system helped alleviate the strain on resources and mitigate the risk of delays and penalties. It also allowed the company to cut outsourced services, which yielded meaningful P&L savings and helped the organization manage its growth projections efficiently.

It is a timely case study as enterprises that engage in international trade continue to experience increases in tariff classification requests as their import and export shipments surge. With global merchandise volume forecast to grow 7.5% this year and 4.1% in 20221, organizations still using manual processes for product classifications — researching and applying HTS codes — may be misclassifying a variety of their products, including anything from direct materials to back-office supplies.

Misclassifications not only cost organizations shipping delays — sometimes from two to 14 days — increasing the likelihood of an audit, but they also lead to steep penalties. In fact, some companies have had more than 80% of their classifications incorrect for products and have incurred U.S. Customs and Border Protection fines of up to four times the lawful duties, taxes and fees.2

However, there is an overlooked solution. Today’s global trade management systems come equipped with automation and machine learning capabilities to streamline classification requests. They cut classification errors and the cycle time, improve a team’s productivity, and help prevent fines and border delays.

Here are the keys to success for organizations using trade systems to overhaul their tariff classification process:

1. Automate the consistent, repetitive classification requests that take up more than 60% of a resource’s time. Organizations can immediately alleviate the workload for classifiers by leveraging automation and machine learning for repetitive product classifications that have slight deviations. Those items can take hours of a resource’s time, leaving little to no bandwidth for other categories that may require more research. As the system learns more about the minor deviations in product types, it can provide accuracy of close to > 95%. Taking manual processes out of the equation helps guarantee supply assurance to an organization’s customer base while mitigating penalties from errors.

2. Eliminate third parties or outsourced contracts involved in classification overflow assistance. Implementing automation for tariff classifications allows an organization to remove outside brokerage services, equating to an immediate P&L savings impact. Some organizations have seen upwards of 10% savings captured by eliminating these obligations. That, in turn, helps positively impact the overall trade governance budget. Not only are the short-term effects instant, but for the long-term, global trade systems can help identify discounts for various classification codes based on trade agreements between importing and exporting countries. These discounts usually go overlooked by internal resources because of how busy they are with other tasks.

3. Use machine learning to help realize a cycle-time reduction for classification requests. Enterprises should leverage global trade services to automate customs rulings updates, ensuring compliance is current for all import/export nations. That leads to a reduction in the time spent by internal resources on researching the data each time a regulatory change occurs. Also, organizations should integrate databases with their global trade management systems to classify past and new unique classifications. Machine learning can leverage past classification mistakes for the future, but for new items, linking information flows from databases can help automate requests as they appear for the first time.

Organizations experiencing growth in their imports and exports must pay attention to global trade systems with automation and machine learning now more than ever to ensure business continuity and future scalability. While digitizing classification processes results in crucial P&L and cost savings, it’s also critical to mitigating the risk of future border delays and steep fines.

___________________________________________________________________

Alex Hayes is a consulting manager at GEP, a leading provider of procurement and supply chain solutions to Fortune 500 companies.

1. https://ihsmarkit.com/research-analysis/global-trade-outlook-for-2021.html#:~:text=We%20forecast%20the%20volume%20of,2021%20and%204.1%25%20in%202022

2. https://www.govinfo.gov/content/pkg/USCODE-2011-title19/pdf/USCODE-2011-title19-chap4-subtitleIII-partV-sec1592.pdf

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Archives, Global Trade Daily, News

Vietnam Drives Out China from the American Wooden Kitchen Furniture Market

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IndexBox has just published a new report: ‘U.S. – Wooden Furniture Of A Kind Used In The Kitchen – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

In 2020, American imports of wooden furniture for kitchens soared by +22% y-o-y to 52M units or $1.9B in value terms. Supplies from Vietnam and Malaysia offset the dramatic drop in imports from China after the tariffs on Chinese products increased. Among other countries, Indonesia, Taiwan, Thailand and Mexico saw the highest spikes in wooden kitchen furniture exports to the U.S. The average wooden kitchen furniture import price dropped by -18.1% against the previous year. 

American Imports of Wooden Kitchen Furniture by Country

In 2020, the amount of wooden furniture for kitchens imported into the U.S. surged to 52M units, increasing by 22% compared with 2019. In value terms, wooden kitchen furniture imports totaled $1.9B in 2020 (IndexBox estimates).

In 2020, Vietnam drove out China from the leading position in the American imports and became the largest exporter of wood kitchen furniture to the U.S. Over the last year, the supplies from Vietnam rose from $224M to $487M. Malaysia occupied second place in the list of top suppliers to America, boosting its exports to the U.S. from $148M in 2019 to $415M in 2020. Indonesia recorded the highest spike in kitchen furniture exports to the U.S. In 2020, Indonesia ramped up the supplies from $13M to $103M. Among other countries, Taiwan, Thailand and Mexico featured the most prominent export growths of kitchen furniture to the U.S. The purchases from China fall dramatically from $831M to $132M owing to raising tariffs on Chinese imports.

Vietnam (16M units), Malaysia (11M units) and Canada (6.1M units) were the main suppliers of wooden kitchen furniture imports to the U.S., with a combined 64% share of total imports. China, Indonesia, Mexico, Italy, Taiwan and Thailand lagged somewhat behind, together comprising a further 27%.

In value terms, the largest wooden kitchen furniture suppliers to the U.S. were Vietnam ($487M), Malaysia ($415M) and Canada ($301M), together comprising 62% of total imports. China, Italy, Indonesia, Mexico, Thailand and Taiwan lagged somewhat behind, together comprising a further 28%.

The average wooden kitchen furniture import price stood at $37 per unit in 2020, with a decrease of -18.1% against the previous year. Prices varied noticeably by the country of origin; the country with the highest price was Italy, while the price for Taiwan was amongst the lowest.

Source: IndexBox Platform

industry
3pls, Archives, Global Logistics, Global Trade Daily

How to Lead When the Industry is Volatile

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In 2011, Prince William was marrying Kate, investors’ eyes were on Greek Prime Minister George Papandreou, and global trade experts were predicting a volatile 2012.

A decade later, Prince Harry just welcomed his first child with Meghan, Greece is still in the EU, and global trade experts are predicting a volatile 2022. 

As the saying goes, don’t wait for the storm to pass — just learn to dance in the rain. For the global trade industry, this translates into: get used to the volatility.

To build a truly sustainable supply chain in an era where the only stable prediction is instability, company leadership must embrace flexibility. Creating an agile organizational structure that’s ready to adapt at the drop of a hat (or the obstruction of a barge) ought to be considered a critical task for any workforce in the industry. Because — and this is the last quote I’ll reference, I promise — as General Electric’s Chief Innovation Officer Sue Siegel said in a 2018 keynote address, “The pace of change will never be as slow as it is today.”

The experts, however, got the cause of the volatility wrong back in 2011 — they thought it would be inflation. Who would have predicted the COVID-19 pandemic, or the Suez Canal disaster? 

Company leaders who pay attention to the growing data on worker productivity and how they rate their satisfaction on their work/life balance will continue to embrace work-from-home culture (now referred to as WFH by those in the know), instead of dismissing it as a temporarily allowable measure during the pandemic.

Within my own company, until last year we enforced a strict policy of keeping computers at the office — we’d decided the risk of damage during transit and at home was just too great. The pandemic forced us to reverse that policy in an instant, on a Thursday in March, without time to prepare. But we haven’t had to replace any equipment yet; it turns out adults can be trusted to take care of their valuables — and to roll with the punches. When I reflect on the resiliency our employees have demonstrated over the past year, I’m amazed.

In fact, I think the first subheading in the economy section of the 2020 history books will be “WFH.” Employees appreciate the flexibility, and those who benefit from mental and physical health-related workplace accommodations are thriving under the ability to create their own schedule and work environment. 

Meanwhile, COOs are shaking their heads wondering why we’ve been paying for all this office real estate over the years.

Leadership coaches have long preached that innovation is prevented when you’re comfortable with structure, and 2020 forced every member of the team to learn this lesson head-on.

Another takeaway for company leadership that the talking heads have been leaving out of their morning segments is that providing total visibility to clients and customers is the first way to ensure viability during a disaster. Yes, you may get an earful at the time when delivering bad news — but they’ll appreciate it in the long run (and trust you more for it) because a sugar-coated status report doesn’t allow managers to make the best decisions possible for their projects. 

Time for one more?

Those whose leadership style leans toward positivity were more likely to see their staff weather the 2020 storm. In a crisis, employees want to grab onto hope — it’s your duty to serve as their cheerleader. At the same time, make sure you have an outlet to vent that frustration away from work, lest you compress yourself into a powder keg that creates an entirely different problem down the line. 

________________________________________________________________

Richard J. Bolte, Jr. was born in Philadelphia in 1957 and joined BDP International in 1973. Throughout his 47-year career with the company, he has held positions covering a broad range of the firm’s operations in global logistics and transportation. His formative experience at BDP centered on ocean exports and supply chain management, with particular emphasis on company operations. Rich was Vice President of the company’s Northeast Region before taking the position of Chief Operating Officer. In 1996 he was named President of BDP International.
 

In 2006, Rich Bolte was named BDP’s Chief Executive Officer; and subsequently, in 2013 the Board of Directors appointed Rich as BDP’s Chairman & CEO. He now serves as the organization’s Chairman to the Board. Rich championed BDP’s global expansion, and the company now employs nearly 5,000 employees in 135 offices throughout nearly 40 countries. He can be reached at rich.bolte@bdpint.com.

fitness
Archives, EU Trade, Global Trade Daily

Fitness Equipment Imports in the EU Grow Despite the Pandemic

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IndexBox has just published a new report: ‘EU – Gym and Fitness Equipment – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

A spike in the fitness equipment imports in the EU has been recorded during the pandemic year, driven by growing demand from retail consumers while fitness clubs’ activity was limited. In 2020, the import value rose by +9.6% y-o-y to $3.4B. Germany, France and the Netherlands remain the largest importers of gym and fitness equipment in the EU.

Gym and Fitness Equipment Imports in the EU

In 2020, the amount of gym and fitness equipment imported in the EU surged to 762K tonnes, picking up by 25% against the previous year’s figure. In value terms, gym and fitness equipment imports totaled $3.4B (IndexBox estimates), rising by +9.6% y-o-y in 2020. While the demand from fitness clubs was limited due to lockdowns, it was offset by soaring retail sales of equipment for home use.

The largest gym and fitness equipment importing markets in the EU were Germany ($659M), the Netherlands ($496M) and France ($467M), with a combined 47% share of total imports. These countries were followed by Spain, Poland, Italy, Sweden, Austria, Denmark, Finland, Belgium, the Czech Republic and Hungary, which together accounted for a further 44%.

In 2020, the gym and fitness equipment import price in the EU amounted to $4,493 per tonne, reducing by -12.2% against the previous year. There were significant differences in the average prices amongst the major importing countries. In 2020, the country with the highest price was Austria ($8,510 per tonne), while the Czech Republic ($3,554 per tonne) was amongst the lowest. In 2020, the most notable rate of growth in terms of prices was attained by Denmark, while the other leaders experienced more modest paces of growth.

Source: IndexBox Platform

chemical
Archives, Global Trade Daily, Imports/Exports, News

China Boosts Imports of Chemical Wood Pulp to Meet Growing Demand for Paper Packaging

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IndexBox has just published a new report: ‘China – Chemical Wood Pulp – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

In 2020, China increased its chemical wood pulp imports by +10% y-o-y to 24M tonnes. It was driven by rising demand for paper packaging and tableware amid the pandemic and further stimulated by a sharp fall in import prices last year. Brazil, Indonesia and Canada are the major suppliers, providing 57% of the total import volume. Bleached sulphate pulp accounted for 95% of total wood pulp imports into China. 

Chemical Wood Pulp Imports into China by Country

Chemical wood pulp imports into China amounted to 24M tonnes in 2020, growing by +10% against the previous year’s figure.  A sharp fall in pulp prices last year also encouraged importers to increase purchases. In value terms, chemical wood pulp imports fell by -9.5% to $12B in 2020 (IndexBox estimates).

In 2020, Brazil (7.2M tonnes) constituted the largest chemical wood pulp supplier to China, with a 30% share of total imports. Moreover, chemical wood pulp imports from Brazil exceeded the figures recorded by the second-largest supplier, Indonesia (3.5M tonnes), twofold. The third position in this ranking was occupied by Canada (2.9M tonnes), with a 12% share.

In 2020, the highest increases in terms of chemical wood pulp volume supplied to China were registered in Indonesia (+25.2% y-o-y), Brazil totalled (+14.6% y-o-y) and Russia (+10.2% y-o-y). By contrast, Canada reduced its export volume to China by -3.6% y-o-y.

In value terms, Brazil ($3.3B) constituted the largest supplier of chemical wood pulp to China, comprising 28% of total imports. The second position in the ranking was occupied by Canada ($1.6B), with a 14% share of total imports. It was followed by Indonesia, with a 13% share.

The average chemical wood pulp import price stood at $507 per tonne in 2020, falling by -17.8% against the previous year. A drop in demand for chemical wood pulp from printing and writing paper mills became the main reason for the price reduction.

Average prices varied somewhat amongst the major supplying countries. In 2020, the countries with the highest prices were the U.S. ($582 per tonne) and Canada ($569 per tonne), while the prices for the product from Indonesia ($448 per tonne) and Brazil ($467 per tonne) were amongst the lowest.

Chemical Wood Pulp Imports by Type

In 2020, bleached sulphate pulp (23M tonnes) was the main type of chemical wood pulp supplied to China, with a 95% share of total imports. Moreover, bleached sulphate pulp exceeded the figures recorded for the second-largest type, unbleached sulphate pulp (1.1M tonnes), more than tenfold.

In value terms, bleached sulphate pulp ($11.4B) constituted the largest type of chemical wood pulp supplied to China, comprising 95% of total imports. The second position in the ranking was occupied by unbleached sulphate pulp ($560M), with a 4.7% share of total imports.

Source: IndexBox Platform