Shipping Costs Suggest Smooth Sailing

Chart of the Week: Shipping Costs Suggest Smooth Sailing

Shipping costs are coming down. China’s zero-COVID-19 policy and resulting protests have analysts worried that exports will be disrupted once more. There are also concerns that a strike could disrupt rail traffic across the U.S. if the White House and Congress fail to enact emergency legislation preventing a widespread walkout.  

But what’s not getting nearly as much airtime is how much things have improved since the start of the year. One way to view this is by measuring traffic at the Los Angeles port. At the start of the year, more than 100 ships were backed up at sea waiting for a berth to unload. Today there are zero.

number of ships waiting to dock at ports decline
Note: Chart shows the number of ships waiting to dock at the ports of Los Angeles and Long Beach in California. October data as of 10/21/22; November data as of 11/22/22. Sources: Marine Exchange of Southern California, The Wall Street Journal.

And shipping costs are coming down as the backlog clears. The Shanghai Containerized Freight Index, a gauge of shipping prices out of China, is at one-third its June level. The average price for shipping a 40-foot container fell to its lowest level in two years earlier this month.

Backlog cleared. Supply chain becoming unkinked. Shipping costs down. That translates into lower inflation—and should continue in the months and quarters ahead. Of course, you won’t see that in the headlines…because bad news sells.

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Chart of the WeekJeff DeMasosupply chain