Shipping companies are seeing their best performance since 2008

The "Evergiven" crisis takes world trade to a new stage

Despite the challenges resulting from the delinquency crisis of the giant cargo ship "Evergiven" in the Suez Canal, which was floated last Monday, and despite its effects on the global economy, the celebrations of shipping companies around the world have not stopped since last year, with their best performance since 2008. As the ships are full of goods, and freight rates are very high, which makes them achieve high profits.

It is expected that the "Evergiven" crisis will lead to the transfer of global trade to a new stage with the strengthening of the transport sector in the world, by raising the rates of cargo shipment, working to reduce the time of maritime transport, and increasing the number of ship trips between Asia and Europe. The types of cargo that fill container ships will change in the coming years.

Strategies

Economist Mark Levinson said in an article in the New York Times: “Starting in the late 1980s, the combination of cheaper container shipping and declining communication costs turned the equation,” explaining that “manufacturers and retailers have adopted strategies that rely on purchasing materials. »Chemicals in one country, then converting them into plastic materials in a second country, and then converting the plastic into components in a third country, to be delivered to an assembly plant in a fourth country.

Levinson added that "container ships made it possible to transport parts and components from one country to another at a reduced cost, and technology also allowed the supervision of supply chains remotely."

redistribution

Levinson said: "There are two factors that led the redistribution in industry. The first is the widening wage gap between the salaries of factory workers in China or Mexico and their counterparts in Western Europe, Japan or North America, while the other factor is the specialization that led to the abundance of production."

He pointed out that «foreign investment was closely linked to export and import, but with outsourcing, there was no need to intervene in the initial part of the production chain, because the brand is placed on the final product, so companies were able to build supply chains at a cheaper price. And contracting with other companies to carry out manufacturing work instead of restricting its shareholders' capital in factories and equipment.

Globalisation

Levinson pointed out that "globalization has stunned executives in multinational companies, especially with the savings resulting from the transfer of production abroad, which led to the closing of factory doors in Europe, Japan, Canada and the United States to reduce costs, and the growth of trade in manufactured goods twice as fast as the global economy."

He stated that "the world cares about the risks arising from the number of companies that may participate in making and presenting any particular product, as all ignored the potential loss in revenue if the supply chain failed to deliver the goods on time." But he said that "one incident after another showed that "Long supply chains are more fragile than imagined. For many companies, the consequences are seen as painful, even fatal."

Calculate risk

Economist Mark Levinson said, "Super-sized container ships such as (Evergiven) are running slower than their predecessors, as the loading and unloading process leads to being behind schedule, port disruption and slow delivery."

Levinson considered that once the risks are properly calculated, manufacturing in remote places at low wages is not always a profitable bargain, but he pointed out that, nevertheless, statements about the death of "globalization" do not have sound basis, as the stage of globalization has exceeded its climax, and is now progressing towards A new stage in which the importance of factory production decreases, and ships do not carry the same large metal containers full of goods.

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