'Container Mafia' driving up shipping costs in China

China became the first country in the world to open up factories on a large scale, setting its enormous industrial engine on the run, with the hopes of reaching pre-pandemic level production. Things seemed to be on track until container shortages came into the scene.

Now, China's world-beating economic rebound from the coronavirus pandemic is being blunted by a global shortage of shipping containers, sending cargo costs to record highs and hampering manufacturing. The reason: imbalance in trade and, a mafia.

Mafia-like structures:

Remember the 1900s, and Hollywood movies highlighting the mafia. The Italian mob controlled a sizable part of American ports. Nothing went in or out of the ports without the permission of mob bosses.

Fast-tracking to 2020, China is seeing a mafia that is rather corporate structuring, doing everything the legitimate way, or so. And a crisis is an opportunity for anyone seeking to capitalize on someone else's woes.

Sensing a profit-making opportunity, some private Chinese firms have been stockpiling containers which are made available to the highest bidder.

A Yiwu-based vendor of household goods, toys, and stationery told Reuters, "Now there is a mafia. You pay extra to get access to containers from private yards, not shipping yards."

And not just China. This is happening across ports in and out of other South Asian countries.

"Each container can cost 3,000 RMB, which is almost $500, and the freight is already three times higher than normal. Everyone's making money, but we aren't making money,” said the vendor.

There are small scale manufacturers who lament that they can't buy their way onto vessels, no matter what they agree to pay up.

"Sometimes, carriers won't book shipping space even when you're paying them double," said a freight forwarder at Ningbo-based Southwest Logistics Group to Reuters.

Countermeasures:

There has been an increasing call by shipping associations in South Korea, Malaysia, and other South Asian countries, requesting government aid to control freight rates.

Reuters says that the container crunch will persist until coronavirus vaccines roll out, and global travel springs back to normalcy.

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