Robert Guy Matthews wrote an interesting Page One article for today’s Wall Street Journal, Ship Shortage Pushes Up Price of Raw Materials (subscription required).
The article sites increased demand for ships from booming manufacturing economies in China, India and other developing nations. This has caused the cost of raw materials transportation to escalate significantly.
The average price of renting a ship to carry raw materials from Brazil to China has nearly tripled to $180,000 a day from $65,000 a year ago. In some cases, ocean shipping can be more expensive than the cargo itself. Iron ore, for example, costs about $60 a ton, but ship owners typically are charging about $88 a ton to transport it from Brazil to Asia.
The article also cites traffic jams in port facilities around the world has lead to significant delays in loading and unloading ships which in turn can cause increased transportation costs.
Even when ships are available to carry the cargo, inadequate port facilities can cause delays, driving up the cost of shipments. At Brazilian ports, ships often wait offshore for as long as two weeks for their turn to load or unload, like airplanes sitting on a runway waiting for a gate.
Brazil isn’t the only source of bottlenecks. As of last week, 131 vessels were waiting to pick up or unload coal and iron ore at Australia’s main ports, according to the Global Ports Congestion Index, which tracks wait times world-wide.
Most American’s simply don’t understand or appreciate how much of what they purchase and consume every day is still dependent on maritime transportation.
Photo credit: Nate Sandel © 2004