Friday, March 12, 2010

Equal and opposite reaction to depressed imports

Backhaul.

One of the reasons given for the unspeakably high freight rates people on Guam have to pay is that there is no backhaul for the ships carrying freight here. The explanation given is that the one-way trade has to pay the two-way transit.

That may be what is also happening on US West Coast ports at the moment.

Guambat's reader may recall a few posts back at the end of 2009 about the dearth of imports to the US, and the signal that sent up that the consumer was becoming distressed. US consumers were trimming their requirements for trade from Asia.

Now, according to Guambat's reading between the lines of the following WSJ article, the backhaul effect may be restraining US exports to Asia.

Export Revival Threatened By Shipping Bottlenecks
The U.S. finally is enjoying some strength in exports, thanks to economic recovery in Asia and a generally weak dollar. But just as U.S. goods find demand abroad, there's a problem getting them there.

It's the opposite of what one might expect. Carriers have a surplus of ships. And since the U.S. still imports more than it exports, freighters arrive in America looking for export cargo to take back, so they don't have to go home empty.

Yet American producers of everything from hazelnuts to cardboard are complaining they can't get their goods shipped in timely fashion.

The constraints arise from the unusual economics of transport businesses such as ports and container shipping. U.S. ports, thanks to the huge appetite Americans have developed for goods made abroad, are oriented more to the import than the export trade. So are the big foreign ship companies, which gear their schedules and their routes to American imports, not to exports.

The ship glut, instead of providing more vessels, perversely is helping make fewer available. That's because the glut, in combination with a fall in trade during the recession, cut shipping rates below the cost of operation for some routes. Carriers responded by idling many ships and reducing their trips to the U.S., to save money and try to force shipping rates higher.

When ships carrying imports call less frequently at U.S. ports, or even skip some ports they once went to, exporters have to wait longer or look harder to find a ride for the goods they want to ship abroad.

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