Causes Of Container Imbalance

Every third container being delivered from Europe to East Asia is completely empty. This is because of the shortage of exports in East Asia to maintain the same level of monthly imports as before. It may also be because of a loss of exports to maintain the same level of monthly revenues as before. Whatever the cause, the effects on the balance of payments are very worrying.

The situation of the container imbalance will be worse during the New Year as the majority of European exports will be purchased by Asian importers. As a consequence of the new year period, the rate of inflation in East Asia will rise sharply as Chinese citizens continue to buy goods in large quantities. This rise in inflation will lead to a sharp rise in global commodity prices, further lowering the profitability of European companies.

In addition, as the imbalance persists, the cost of European raw materials will increase making them less competitive in the global market. As a result of the high number of empty containers, Europe’s capacity to secure the necessary freight and shipment space will be reduced drastically leaving it with limited access to the required raw materials for its normal business operations. Furthermore, if the slowdown continues at a rapid rate, there is a high chance that the gap between supply chains and demand will widen between the two. This will eventually have a negative impact on the European economy. However, the good news is that the container imbalance is temporary as the coming year is going to see a return to normal economic conditions which should provide enough space for the European companies to continue trading as usual.

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Bonnie Baldwin