Posted on 06/13/2008 8:34:24 AM PDT by Fred
The rising cost of shipping everything from industrial-pump parts to lawn-mower batteries to living-room sofas is forcing some manufacturers to bring production back to North America and freeze plans to send even more work overseas.
"My cost of getting a shipping container here from China just keeps going up -- and I don't see any end in sight," says Claude Hayes, president of the retail heating division at DESA LLC. He says that cost has jumped about 15%, to about $5,300, since January and is set to increase again next month to $5,600. HOMEWARD BOUND
• The News: Soaring fuel prices are prompting some U.S. companies to bring overseas production back closer to home. • The Background: Higher oil prices are part of a larger wave of inflation hitting manufacturers in low-cost countries as wages rise and regulations tighten. • What's Next: Don't look for U.S. factory jobs to soar, but the bleeding could slow. Mexico may be the biggest beneficiary.
The privately held company, known for making the heaters that warm football players on the sidelines, recently moved most of its production back to Bowling Green, Ky., from China. Mr. Hayes says the company was lucky to have held onto its manufacturing machinery. "What looked like an albatross a year and a half ago," he says, "today looks like a pretty good asset."
The movement of factories to low-cost countries further and further away has been a bittersweet three-decade-long story for the U.S. economy, knocking workers out of good-paying manufacturing jobs even as it drove down the price of goods for consumers. But, after exploding over the past 10 years, that march has been slowing.
The cost of shipping a standard, 40-foot container from Asia to the East
(Excerpt) Read more at setup2.wsj.com ...
.
The weak dollar can work for us as well as against.
The increase in US manufacturing will be a very positive impact of the weak dollar.
They’ll just move all of the jobs to Mexico instead of China. $2 bucks an hour labor instead of 36 cents.
One hundred years from now, when you won't get oil at any price ......
One word
Okay
You listening?
Yeah
Sailboats
and more Mexicans can stay in Mexico
There’s always an advantage to something, isn’t there :-)
‘Twas the grand height of the sail age!
If Wal Mart and others decide in the same way, the collapse of that Chinese juggernaut will occur.
yep
Sorry about the caps. Didn't realize the key was down and wasn't watching while I typed.
So was it worth exporting jobs for the margins indicated by the additional fuel costs? I’m not an isolationist and I think international trade should flourish, but to piss on the domestic work force to save a few dollars is an affront to the interest of the Country and the citizens that lose their jobs as a consequence. I wish for no law or restrictions relating to outsourcing, but it would be nice if some brotherly love would prevail when the margins are small.
We need to rebuild our industry now!
Exactly!
Business understand the punishment the Feds have in store for us.
Cap and Trade equals cap and kill! Higher taxes and regulations on the way! Look out!
And will President Bush be remembered fondly for this? I hope so. I've admired this policy since it started. (And I have the posting history to prove it!)
If the Chinese are smart they will simply pay part of the freight. I know I would before I let the business get away.
That’s the funny thing about economics....
Just was in a meeting discussing this very thing. We are realizing that we must develop a strategy to source material closer to home (US and more importantly Mexico). Some of the big mfg companies are moving quickly. India is almost completely out of the picture and we are close to being able to make parts here cheaper than we can get them from China.
or produce a worse product by downsizing their workforce.
i read somewhere that China needs to produce 10 million jobs a year in order to satisfy the needs of those people
turning away from an agrarian life to urban life.
Could you imagine the uproar if those jobs dried up?
Finally, I mentioned this on several posts more than a month ago, but nobody ever listens. As previously stated, consider the energy cost to manufacture in China is comparable to manufacturing here in the US, while the cost to ship it back overseas is a huge energy expenditure that can be discarded with domestic production.
Early this year, I noticed a big increase in the amount of timber being sold and clearcut in the rural areas here in NC. I’d never seen so much being sold and cut. This is private land, mixed hardwoods. I asked about it, and was told that it was being shipped to China. Isn’t that something - US hardwoods sold, cut and shipped to China, made into furniture or whatever, and very likely shipped right back to the US. I couldn’t see even then how it was cost effective, this was before the huge runup in fuel costs. Can’t imagine that it’s cost effective now.
How will that happen? Most of their workforce is already up here.
Oh we’re listening to you all right, Neoliberalnot. It’s just that we’re ignoring you :-) Your point was as valid then as it is today.
The Cost in additional energy consumption is even more striking in this case. Yes, if you have checked where most furniture is manufactured today, you would be right in assuming China. We bought a $1500 roll-tip solid oak desk about 3 years and found out too late—made in China. go figure.
Good tag line. May I use it for other purposes in an email?
-------------------------------
..sort of like the Scottish shellfish going to China for processing and then being returned...
PRAWNS, SHRIMP, LITTLE ONES ETC.
On Farming today, (Radio 4, 25. 9. 06) it said that prawns farmed in Lanarkshire are then sent to China for processing and returned for packaging here. The Chinese workers get £40 a month and ours £800 a month assuming an 8hr 5day week. The owners say that this is the only way to maintain economic viability.
This one always amazed me...:^)
By all means.
Dude I never saw this coming but I wished for it! I hate that made in China, bought at Wal-Mart crap!
You can’t even eat Chinese food that you are not hungry one hour later!
At least with Mexican food, it sits in your stomach for 24 hours, or until you take castor oil.
read somewhere that China needs to produce 10 million jobs a year in order to satisfy the needs of those people
turning away from an agrarian life to urban life.
Could you imagine the uproar if those jobs dried up?
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
I hope they dry up! I was wishing for this!
I WANT AMERICAN MADE! I WANT QUALITY ONE AGAIN!
sowwy I am ranting!
One of our customers is a iron ore mine in Quebec. The Chinese have bought out their entire production for many years to come. The ore is loaded on ocean-going carriers in the St Lawrence seaway goes all the way around the southern tip of South America, as the ships are too large for the Panama Canal. After the trip completely across the Pacific it is made into steel consumer goods and sent back.
As it is beneficiated ore it is only 66% or so iron for all that transportation.
Wal-Mart? Buy American? What are you, some kind of commie or something?
mark
You know, everything has a way of working out over time.
prices never “keep going up”. They never have and they never will.
I wonder how much it will cost the Chinese to cancel that contract? The shipping costs have got to hurt
It is going the other way - they are increasing production this year.
My work formerly involved me in trans-ocean shipping. Most people have no idea just how cheap and cost effective it is. Although freight prices are rising and is cutting into margins, it isn’t nearly as debilitating as the article makes it out to be.
Ocean cargo is ludicrously efficient, costing pennies per pound and although fuel prices rise, they only form a minor part of the final cost of a good.
The time between June to November is the busy season and most NVOCC’s will charge a peak season surcharge of a 400-500 dollars. The bunker charge is only part of the cost, with maritime insurance, and all godly paperwork making up a signfiicant portion of the total cost. For example, 40-ft container traveling from Shanghai to Port Everglades will cost roughly 5300 dollars, but that same cargo itself will be worth anywhere between 50000-100000 or more depending on contents. The inland rail + trucking will add even more to the final cost. The price of the fuel itself will ultimately be less than 1% of the final cost.
“What’s Next: Don’t look for U.S. factory jobs to soar, but the bleeding could slow. Mexico may be the biggest beneficiary.”
Manufacturers will just look for cheap labor closer to home, and an increase in illegal immigration and ‘temporary’ work visas.
He indeed is lucky. I have been through Indiana, for instance, and seen vacant factories one year and clear ground the next as companies razed those buildings to bare-lot status to save on property taxes. Many factories will NEVER come back as they'd be too expensive to build today.
The movement of factories to low-cost countries further and further away has been a bittersweet three-decade-long story for the U.S. economy, knocking workers out of good-paying manufacturing jobs even as it drove down the price of goods for consumers.
And what low price is that? Check around. A flannel shirt made in Bangaladesh, for instance, cost $15 at Wal-Mart. American companies could make that same shirt and sell it for $15, only the profit wouldn't be as much. Lots of stuff made cheaply overseas still command an Made-in-America prices.
My argument to all these fleeing companies is that they were laying off each others customers in their greed. When most are at service-job wages, there's no money left for the trappings of middle class success.
Between the cost of rebuilding heavy industry factories and the still prevalent Global Competition B/S, not many Americans will get any benefit out of this.
no
it depends, in a lot of cases, the burdened labor rate in Mexico is exactly the same as Mexico.
Companies were using China as a way to be close to their suppliers and to make an investment in China.
Everyone wanted to have a factory there so they could be near 1B+ potential customers.
Their take home may be 36 cents, but there is a lot of red tape, benefits, and duties that boost that.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.