What's it really gonna cost to ship?

This statement from the Economist would make one think you can ship a container from China to Europe for almost nothing.

$0.00, not counting fuel and handling: that is the cheapest quote right now if you want to ship a container from southern China to Europe. Back in the summer of 2007 the shipper would have charged $1,400.

But wait, how much exactly is the cost of fuel and handling today?

I can't be sure, but the last Bunker Adjustment Factor (which I assume is the fuel charge mentioned) was 1220.00 per 40ft container. And that's just for the bunker, the handling (generally called THC) could run you another 200 or more. So, it could be more than 1400, the cost mentioned from 2007.

The Economist doesn't even mention if the rate quoted is for a 20ft container or a 40ft container. I guess for their purposes it doesn't matter - they are assuming today the price is almost for free.

The ships are sailing at half capacity, so the carriers aren't making any money.

In response to this, tonnage is being pulled out, ships are being laid up.

That's what one does, get the supply down to more closely match the demand.

Here's one example MOL has pulled out 30 percent of their capacity.

TEN per cent more capacity is to be stripped from Japanese shipping giant MOL's tonnage starting in April in response to the global downturn, reported Nikkei, Japan's largest business daily.

This is in addition to the 20 per cent previously cut on the Asia-North America route and by 10 per cent on the other routes, the report said. Nikkei also said MOL had previously slashed Asia-Europe capacity by 30 per cent, but will not make any additional reductions.

"We plan to make an additional cut in our container transport capacity from April ahead of other shipping companies, as demand has been slumping globally since last autumn," an MOL spokesman said.

And I just got a press release from Hamburg Süd announcing capacity cuts and rationalization in their Asia to Mexico service.

Total nominal capacity will be
reduced by 2,500 TEU per week in the period from February 24 through
to August 2009. Hamburg Süd, CCNI and MSC will review the trade
prospects in June 2009. Should the trade situation improve
sufficiently to warrant additional capacity the lines will revert to
their original service set up.

Looks like everyone will see how things are going in mid-2009 before they make any more changes.

It's a real pain, and costs quite a lot of money, to move ships in and out of a service.