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You're underestimating how staggeringly cheap ocean freight is. A 40ft container can be shipped from China to NYC for under $3000; it's a very small portion of

You're underestimating how staggeringly cheap ocean freight is. A 40ft container can be shipped from China to NYC for under $3000; it's a very small portion of the retail cost of most goods. Even if cargo vessels all have to travel around the cape of good hope for a year or two, this increases the cost by a small percentage and is not going to kick off major inflation. Futures markets back this up, pricing in very modest increases in ocean freight shipping costs for the next several years involving this route, e.g. https://www.cmegroup.com/markets/energy/freight/container-freight-china-east-asia-to-us-east-coast-fbx03-baltic.html https://www.cmegroup.com/markets/energy/freight/container-fr...

gnicholas 3y ago
Does this diversion significantly affect travel time, which would cause some shippers to opt for air instead of ocean?
- semiquaver 3y ago
  It adds 7-10 days to a trip that would normally take 30-40 days: https://www.flexport.com/blog/global-ocean-carriers-halt-red-sea-transits-what-to-expect/ https://www.flexport.com/blog/global-ocean-carriers-halt-red... Air cargo rates are 10-20x ocean, so it’s unlikely an extra week of travel would justify the expense for most cases.
  - verelo 3y ago
    My point is it’s not cheaper it’s more expensive, at precisely the wrong time. Sure shipping costs might be a small fraction of the costs of goods…but…unless it’s <= 2% that ain’t helping inflation so let’s do something about it. TLDR: it’s more than 2%, the average value of a shipping container is 50k, it costs 3k to mover. This is an issue, let’s resolve it. https://porteconomicsmanagement.org/pemp/contents/part1/maritime-shipping-and-international-trade/value-containerized-trade/#:~:text=About%2070%25%20of%20the%20value,TEU%20or%20%24109%2C000%20per%20FEU.P https://porteconomicsmanagement.org/pemp/contents/part1/mari...
    - semiquaver 3y ago
      FYI: You misread your link, it quotes the average value of a Twenty Foot Equivalent Unit as 55K, so 109K for an FEU which costs 3K to ship. Furthermore, these numbers are wholesale values; a reasonable rule of thumb is to double that for retail prices. That puts the cost of sea freight at about 1.3% of retail using your numbers. Even a doubling would be dwarfed by other factors driving inflation.
      - verelo 3y ago
        Ok great feedback, your point seems extremely valid, thank you!

gnicholas 3y ago

Does this diversion significantly affect travel time, which would cause some shippers to opt for air instead of ocean?

semiquaver 3y ago
It adds 7-10 days to a trip that would normally take 30-40 days: https://www.flexport.com/blog/global-ocean-carriers-halt-red-sea-transits-what-to-expect/ https://www.flexport.com/blog/global-ocean-carriers-halt-red... Air cargo rates are 10-20x ocean, so it’s unlikely an extra week of travel would justify the expense for most cases.
- verelo 3y ago
  My point is it’s not cheaper it’s more expensive, at precisely the wrong time. Sure shipping costs might be a small fraction of the costs of goods…but…unless it’s <= 2% that ain’t helping inflation so let’s do something about it. TLDR: it’s more than 2%, the average value of a shipping container is 50k, it costs 3k to mover. This is an issue, let’s resolve it. https://porteconomicsmanagement.org/pemp/contents/part1/maritime-shipping-and-international-trade/value-containerized-trade/#:~:text=About%2070%25%20of%20the%20value,TEU%20or%20%24109%2C000%20per%20FEU.P https://porteconomicsmanagement.org/pemp/contents/part1/mari...
  - semiquaver 3y ago
    FYI: You misread your link, it quotes the average value of a Twenty Foot Equivalent Unit as 55K, so 109K for an FEU which costs 3K to ship. Furthermore, these numbers are wholesale values; a reasonable rule of thumb is to double that for retail prices. That puts the cost of sea freight at about 1.3% of retail using your numbers. Even a doubling would be dwarfed by other factors driving inflation.
    - verelo 3y ago
      Ok great feedback, your point seems extremely valid, thank you!