Posted by Mark McAlister on Thu, Jun 24, 2010 @ 03:33 PM
Recently we have seen China come out and say that
they will "further reform the RMB exchange
rate
regime and enhance the RMB exchange rate flexibility"
We all know that
CHINA has undervalued their currency for the greater part of the past
decade
where they have been the hub of manufacturing for all developed
countries in
the world. The Chinese government has had the goal of their export
manufacturing being the engine for economic growth and job creation in
China
for the past 25 years. The strategy has largely worked, with China
putting up
better than 10% annual GDP growth for the past 30 years. By announcing
their
plans to reform their fixed-rate system, China is finally signaling a
willingness to allow supply and demand to determine the value of its
currency.
They are following in the vision implemented by Deng Xiao Peng over 20
years
ago when they opened up Shenzen and Guangzhou as their “experiment”
with FREE ENTERPRISE. Interesting that it came about the time the
Berlin wall was coming down and the whole world had seen not only that
communism doesn’t work, it is a destructive force with Tsunami power in
demolishing societies, as it tragically did with China from 1949 until
the
early ‘90’s when China started to wake up and smell the coffee brewing
over in West.
So now if you walk
down a major street in Shanghai, you will see at least 3 Starbucks
within one
block radius. You first have to pass a KFC, McDonalds and a few
Malls the size of a small town (underground up to 5 floors high) and you
would
swear you were in Manhattan.
Given China's
trade surplus and all of that foreign investment cash flowing into
China,
the consensus is that China's currency should appreciate quite a bit --
with
some experts suggesting that their exchange rate will strengthen to 4
or
5 RMB to the dollar rather than the current 6.8 RMB to the dollar , 25%
increase, coming soon !!!
So if you are an
average American that has a home filled with about 75% of goods made in
China,
or worse yet, your business is directly related to imports from China;
Importer, Wholesaler, Logistics, Transportation, retail, etc, you have
to see
the writing on the wall that the U.S. dollar is only going to get
weaker. Besides the China factor, history has proven that
recessions always follow with inflation.
So money will
continue to be tight, consumer costs will continue to rise, and let’s
not
forget about the hidden inflations ; TAXES,( thank you Democrats)
ILLEGAL
IMMIGRATION (Thank you Ted Kennedy ’64), INTEREST on our National debt,
soon 40% of tax revenue to the U.S, Treasury will go towards servicing
the
debt, and who really pays for this ? (Thank you Progressive movement),
the U.S.
Bogus system of calculating actual inflation, cooked books (Thank you
past Administrations
going back 20 years) and then we have the brand new one courtesy of Mr.
Obama,
the HEALTH CARE BILL. Health insurance will go up dramatically, forcing
employers to pay more in premiums and taxes which will be passed on in
the
rising costs of goods and services to the public and further increased
unemployment.
What we are left with
in the coming decade is among other more dire circumstances, which I
will not
delve into, but one of great significance. That is the U.S. will have to
become
an economy dependent upon exports. Not just of Cotton, Lumber, Scrap,
waste paper, Agriculture, Rawhide, etc, but actual consumer manufactured
goods.
Most people don’t
realize that with all the ballyhoo about our trade deficit with China
being so
huge, is that the U.S. economy is still at least 4- 5 times larger than
China’s
and our exports still outnumber those of China. It is mind boggling I
know, but now that you see our dollar destined for another WEIMAR
REPUBLIC, together with CHINA’s growing middle class (more than the population
of
the U.S.) with an RMB at 4 or 5 per USD, it doesn’t take a Rocket
Scientist to deduce that China as well as other healthy economies
(wherever
they are) can afford to buy goods made in the Good old YOO ESS OF AYE.
So if you are
wondering “ where is the future of my business”….now is a
good time to seriously evaluate how manufacturing and exports can fit
into the
picture.
I would also like to
add that it has become “In” and trendy in China to buy goods made
in the USA now. In fact the “Yuppies” of China are willing to
pay higher prices for higher end merchandise and anything that reflects
the
American way of life. The real truth is that people in China are in
love with America and want to emulate our lifestyles. This is the
future.
(that and our children better start learning mandarin)
Devin T. Burke
CEO, Universal Cargo
Posted by Mark McAlister on Fri, Jun 04, 2010 @ 05:27 PM
In trying to make sense of recent sea freight and
air cargo rate fluctuations, we've gathered information from several sources and made the following observations:
1) Rates are going up and staying up, not down
2) Space will be an issue probably all year
3) Expect “new” surcharges
IN SHORT: We're all paying for that great 12 months we all had with the lowest freight rates in History between Oct ’08 through Sep ’09.
Here's a rate chart showing what we're seeing (as of 29-May-2010) at
Universal Cargo Management, Inc.
CARRIER
|
EFFECTIVE DATE
|
2010 PSS
|
Remark
|
APL
|
2010.8.1
|
320
|
400
|
450
|
505
|
from China to USA (except Puerto Rico and Virgin Islands)
|
CMA
|
2010.6.15
|
320
|
400
|
450
|
510
|
from Asia to USA/Canada (East & West Coast, IPI, MLB) - cargo receipt date at origin
|
Cosco
|
2010.6.15
|
320
|
400
|
450
|
506
|
from Far East and Indian Sub-Continent to USA/Canada
|
CSAV
|
2010.6.15
|
320
|
400
|
450
|
|
from Asia to USA
|
CSCL
|
2010.6.1 ~ 2010.11.30
|
320
|
400
|
450
|
505
|
from Far East, Middle East and Indian Subcontinent countries/areas to USA
|
EMC
|
2010.6.15
|
320
|
400
|
450
|
506
|
from Far East (except India)/S.Africa to USA/Canada
|
2010.6.15
|
360
|
450
|
506
|
570
|
from India to USA/Canada
|
Hapag
|
2010.6.28
|
320
|
400
|
450
|
510
|
from Asia and Indian Sub-Continent to USA/Canada, except India - date of cargo receipt at origin
|
2010.6.28
|
300
|
375
|
425
|
n/a
|
from India to USA/Canada - date of cargo receipt at origin
|
Maersk
|
2010.6.15
|
320
|
400
|
450
|
510
|
from Far East Asia to USA/Canada (Transpacific Eastbound)
|
Matson
|
2010.6.16
|
320
|
400
|
450
|
506
|
Transpacific Eastbound (excluding Hawaii, Guam)
|
MOL (PSC)
|
2010.6.15 ~ 2011.3.31
|
400
|
500
|
565
|
635
|
from Asia to USA/Canada
|
MSC
|
2010.6.15
|
320
|
400
|
450
|
|
to USEC and US intermodal points via USEC
|
2010.6.15
|
400
|
500
|
563
|
|
to USWC and US intermodal points via USWC
|
OOCL
|
2010.6.15 ~ 2010.11.30
|
320
|
400
|
450
|
505
|
to USA/Canada - base on cargo receiving date
|
Wanhai
|
2010.6.15 ~ 2010.11.30
|
320
|
400
|
450
|
510
|
to USWC
|
BOTTOM LINE: At Universal Cargo Management, Inc., we advise our clients to make reservations early if possible and structure your contracts carefully making certain thatall fees are clearly declared in order to prevent unpleasant surprises.
Posted by Mark McAlister on Fri, Jun 04, 2010 @ 05:24 PM
- U.S. and China Continue to Arm Wrestle
Recently U.S. govt and Chinese govt officials met for the Strategic and Economic Dialogue (S&ED) talks for another round with the indigenous innovation issues.This involves China’s desire to develop and export more “High end” technology and compete with the U.S. WHERE WE RULE and will hopefully continue if our education system ever gets back on track, but I digress. While China's government continues to drag their feet in making it harder for copycats to steal our technologies. However score this round to the U.S. for not only getting China to be more flexible about this issue, but they are now willing to “rewrite” the contract for being in the WTO when they all sit down next month.
The other issue would be on what exactly does China plan to do with their currency evaluation?
If you are in the business if import or international shipping you are most likely crossing your fingers and telling the Obama administration to “shut the hell up”, or if you are an exporter, or a U.S. manufacturer you are screaming at the top of your lungs “ADJUST THE YUAN EXCHANGE RATE to reflect the Market” so America can rebuild it’s competitiveness on the World market for it’s goods and services. Either way, it appears as China is not only becoming a consumer market on the world’s stage, but also slowly moving towards a higher end technology (like what happened to Japan in the ‘80’s and Taiwan in the ‘90’s) they realize that it is inevitable that the RMB strengthens another 10-15% in the coming year. China is just biding their time, while the U.S. keeps nudging them along. So America, it’s time to get your thinking cap on and get back to the workshop and innovate. (That and maybe buy a few RMB along the way maybe)
Posted by Mark McAlister on Fri, Jun 04, 2010 @ 05:23 PM
...Time to "Pay The Piper" In History, an old tale tells us of, the piper who was owed payment after solving an overcrowding problem for a small medieval village, dire consequences awaited the village when they tried to avoid paying the piper for his expertise in export services.
Over the past few years, international shipping companies have been operating at significant loss in order to address demand for cargo services, especially between the U.S. west coast and Asia.
Not so any more.
The carriers have been on a mission since last summer to raise the ocean freight rates in an effort to make back all that money they lost in ’08 and ’09. Right now in the Pacific Rim where most traffic lies, the ocean freight rates have risen dramatically this year (between $1500-2000 a ’40) with another Peak Season Surcharge set for June 15th of $400/40 avg.
Just as we have seen for the past few years, the Cargo Carriers also use the bunker (BAF) or floating fuel surcharge as leverage to have a reason to raise the rates if they have contracts locking in prices with their customers.
As we notice the price of a barrel of oil has decreased recently from $90 to $70 a barrel, of course the ocean freight or BAF has not decreased, it has not changed. However when the price of oil goes back up again, which you can bet on given the recent Gulf mess, there is a high likelihood that the bunker will increase again sometime this year. Otherwise you may find more “space problems”.
SOURCE: Hellenic Shipping News
The cost to produce/extract mineral/fossil fuels goes up when disasters like our oil spill in the Gulf. Especially as resource exploration and drilling production regulations adjust to prevent similar disasters in the future. BOTTOM LINE: Get your shipping contracts in place sooner rather than later to lock in your ocean freight rates.
Posted by Mark McAlister on Fri, Jun 04, 2010 @ 05:18 PM
...and what it means for US Freight and Cargo firms
On 1/12/10 the Baltic Exchange Dry Index (BDI) website quoted Reuters report that Dry bulk ship owners are insisting vessels go via the Cape of Good Hope on voyages from South Africa to Mediterranean ports to avoid pirates in the Gulf of Aden - adding 10 days to shipping times. Utilities in Italy, Greece and Israel which use coal shipped from Indonesia and South Africa are having to pay higher shipping costs for the longer voyages, utility sources said. Around 60 percent of South Africa's 60 million tonnes a year of coal exports goes to Europe.
FURNITURE TODAY NEWS - Go After Globe Express' customers.. Barcalounger, American of Martinsville file Chapter 11 Companies could be sold to affiliate of current owner Larry Thomas -- Furniture Today, May 20, 2010 WILMINGTON, Del. - Upholstery producer Barcalounger and its sister company, contract furniture source American of Martinsville, have filed for Chapter 11 bankruptcy protection. The joint filings, made a little more than a month after the two companies shut down their factory in Martinsville, Va., said parent company Hancock Park Capital already has agreed to sell the companies to another affiliate of Hancock for $1.5 million. The sale would have to be approved by the bankruptcy court, which would conduct an auction if another bidder surfaces...(more)
See: "Trade Logistics 101: An Introduction to Forwarding" By William Corley
As the world economy recovers, opportunities increase for U.S. companies to export their products. But international shipping remains daunting for many new or relatively inexperienced exporters, particularly small and medium-sized firms. To assist these firms, we offer the first in a series of articles about international trade logistics.
Effective use of transportation equipment and modes reduces shipping and logistics costs. However, export planning entails all sorts of considerations, from inventory levels and manufacturing lead times to customers' preferences and transportation options. Ocean export is generally much cheaper than air export, but the transits from warehouse dock to consignee door are measured in weeks instead of days.