Shipping costs pinch profits

In Sunday's NY Times front page: Shipping Costs Start to Crimp Globalization

Some excerpts from the story

Many economists argue that globalization will not shift into reverse even if oil prices continue their rising trend. But many see evidence that companies looking to keep prices low will have to move some production closer to consumers.

The cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade, according to a recent study of transportation costs.

The study, published in May by the Canadian investment bank CIBC World Markets, calculates that the recent surge in shipping costs is on average the equivalent of a 9 percent tariff on trade. “The cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today,” the report concluded, and as a result “has effectively offset all the trade liberalization efforts of the last three decades.”

Will Transportation stocks lose their luster?

In a more regionalized trading world, economists say, China would probably end up buying more of the iron ore it needs from Australia and less from Brazil, and farming out an even greater proportion of its manufacturing work to places like Vietnam and Thailand. Similarly, Mexico’s maquiladora sector, the assembly plants concentrated near its border with the United States, would become more attractive to manufacturers with an eye on the American market.

Is it time to look south of the border for opportunities?