The United States President Joe Biden took to his Instagram handle a few days ago to lambast the world’s largest shipping companies for one of the reasons why the US and indeed global inflation rate is at a 40-plus year record high.
According to Biden
“Nine major shipping companies, consolidate into three alliances control the vast majority of ocean shipping in the world and each of these nine is foreign-owned. During the pandemic, these carriers increase their prices by as much as 1000%, (1000%) while families and businesses struggled around the world these carriers made $190 billion in profit in 2021 seven times higher than the year before (seven times higher than the year before) and they raked in the profits and the cost got passed on as you might guess directly to consumers sticking it to American families and businesses because they could”
President Biden Is Blaming These Shipping Companies For Rising Inflation Across The World
Shipping prices have risen over 10 folds over the last 8 months. According to Reuters, “the cost of shipping a 40-foot container (FEU) unit has eased some 15% from record highs above $11,000 touched in September, according to the Freightos FBX index. But before the pandemic, the same container cost just $1,300.”
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Even though shipping prices have since come down to about $8000 they are still 700% higher than they were before this year, suggesting we have a long way to go. Some analysts suggest it could take two to three years for the prices to come down except enough storage infrastructure is built at a faster pace.
But as the US shifts most of the blame on shipping companies, the pandemic, and even Putin, economists around the world attribute the rise to demand amidst a supply glut. The trillions of dollars in stimulus payments made between 2020 and 2021 and a major reason for the rise in demand with the majority of Americans awash with billions of dollars to spend.
While Americans swelled in cash and demand, the world was still grappling with supply challenges increasing the output gap which is an economic measure of the difference between the actual output of an economy and its potential output.
Supply challenges meant fewer ships available to carry goods, lack of capacity at shipping docks in the US to cater to the number of containers due to surging demand, long delays at shipping docks forcing a container pile up, and all of this meant shipping companies had to raise prices.
However, it is election season in the US, and politicians being who they are need to blame someone for the issues rather than themselves. Thus the shipping companies and law were introduced to address the allegations. The Ocean Shipping Act of 2022, signed by President Biden is expected to crack down on the industry fees and mode of operation.
But, who are these shipping companies in question, and why are they so powerful? We also list the number of container ships they own and their capacity which is measured in TEU. TEU is an acronym used in logistics, which means ‘Twenty Equivalent Unit’ or in other terms a ’20-foot container’.
- MSC – Mediterranean Shipping Company – This is a Swiss-owned International Cargo company with over 645 container ships. They have a capacity of about 4,287,473 TEU.
- APM-Maersk – Is a well-known Danish-owned shipping company with about 738+ container ships and a capacity of around 4,275,542 TEU
- CMA-CGM – the French-owned company operates about 568 ships and has a carrying capacity of around 3,198,217 TEU.
- COSCO (China Ocean Shipping Company) – is Chinese owned and one of the largest fleet operators in the world. They operate about4 80 container ships with a capacity to carry containers equivalent of 2,932,779 TEU. Reports suggest this may increase to about 5,850,000TUE
- Hapag-Lloyd – the German-owned company operates about 250 ships catering to about 1,743,983 TEU containers carrying
- ONE – Ocean Network Express – This Japanese-owned shipping alliance owns 209 vessels with a container carrying capacity of 1,531, 530 TEU. They operate out of Singapore.
- Evergreen Line – this popular shipping company is based out of Taiwan and owns about204 container ships and a container carrying capacity of 1,477,644 TEU. They have been operating since 1968.
- Hyundai Merchant Marine – the South Korean-owned shipping company owns75 vessels and a cargo-carrying capacity of over 819,790 TEU
- Yang Ming Marine Transport – another Taiwan-owned shipping company owns about 90 vessels and has a carrying capacity of around 6,62,047 TEU.
- Zim Integrated Shipping Services Ltd – is an Israeli-based shipping company with 111 ships with a total container carrying capacity of 4,19,064 TEUs
These are basically the top shipping companies in the world that President Biden believes are the major reason for the increase in inflation. Between them, he claims they have raked in about $190 billion in profits.