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Christmas does not exist: ships from China arrive half-empty, e-shops in crisis, recession is coming

“While the volume of goods transported from Asia to Europe increased year-on-year from January to August, in the final third of the year we are already experiencing a slowdown associated with the impending global recession. The capacity of individual transport ships is currently around seventy percent. Even last year, there was a wait for free capacity for several weeks,” recalls Jukl.

Danish shipping company AP Moller-Maersk has previously estimated that global demand for containers will fall by two to four percent year-on-year this year due to a slowing economy. The company’s shares are down 36 percent so far this year.

While the current period is usually the peak season for maritime trade, demand is now withering, which is also reflected in the discounting of containers. As Bloomberg reported, the cost of shipping goods from China has dropped to its lowest level in more than two years. “In the case of a 12-meter container, the cheapest prices for sea transport from base ports from China to Hamburg are currently below three thousand dollars, i.e. roughly 71 thousand crowns,” adds Jukl.

The reasons for the completely atypical development in the pre-Christmas period include both high price growth in Europe, which weakens purchasing power, and production difficulties in China, which were caused by the coronavirus closures.

“Demand in Europe is lower mainly due to inflation and high energy prices, which is prescribed in foreign trade and transport data. As a large part of consumer goods are imported from Asia to Europe, shippers will feel this in lower prices,” says Deloitte chief economist David Marek, according to whom the emptying of capacities in containers on the China-Europe route signals the imminent onset of an economic recession.

Domestic e-shops, for example, are already facing an unprecedented cooling of demand. After all, the entire e-commerce market is in decline for the first time in its history. Sales for online stores have fallen year-on-year for nine months in a row. As it emerged from the analysis of the company Shopsys, which develops and manages e-shops of clients, in the first three quarters e-commerce was in a year-on-year decrease of up to thirteen percent. The decline is partly influenced by record sales from the past two years, which the pandemic helped traders achieve, and partly by the current drop in demand.

“After twenty years of growth, e-commerce began to decline and is now more or less in crisis,” says Shopsys director Matěj Kapošváry. Although a large number of online stores face a fight for survival, customers will not see a significant discount anytime soon. “Traders have full warehouses of goods that were imported at a time when transport prices were still high. As a result, the price for storage also increases, because there is no longer anywhere to store goods,” adds Jukl from DSV. Data from the company Sklady.cz confirm this.

Prices for renting warehouses have been growing dynamically all this year. Rental capacity in the new large hall in the “A” standard thus doubled year-on-year. “Before the pandemic, average prices were around three euros per square meter per month, now we are at twice that. The most expensive warehouses in Prague and the surrounding area cost around 8.5 euros. In the case of Brno, around seven euros, Ostrava benefits from a greater amount of capacity and is around six euros,” explains Roman Kučera, director of Sklady.cz.

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There are currently almost no free capacities on the market. The solution can be either to wait for the construction of new warehouses, or to speculate that in the first half of next year part of the capacities will be freed up due to the numerous difficulties of the stores. “So far, however, we manage to immediately fill any available capacity,” adds Kučera.

According to Mark, how long the Czech Republic and the whole of Europe will struggle with the impending deeper recession will depend mainly on the development of energy prices. “And they will not be lower in the foreseeable future. The key will be how Europe manages to secure energy supplies for next winter,” emphasizes the economist.

“So far, the situation has stabilized thanks to favorable weather. However, the absence of Russian gas and the connection of gas prices to electricity prices still apply. Even though prices have stabilized, they are still many times higher than they used to be,” states Marek. The impact on inflation, demand and economic growth can thus last several quarters or even years.

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