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Indian firms hit as China plants shut

Neil Heathcote, BBC Online
At the Alok Industries plant on the outskirts of Mumbai, thousands of metres of material are dyed red, blue and green, each day, ready to be made into clothes.

But colours that used to be freely available are suddenly in short supply.

Dye prices have risen rapidly…

…Chinese suppliers cornered much of the global dye market a few years back.

So this should be a golden opportunity for India’s dye makers to step into the breach.

But they cannot produce more colours to meet demand, because these days they source their raw materials from China.

And at the moment those ingredients are not available either…
(22 July 2008)

Shipping: The greening of the ocean waves

Jimmy Lee Shreeve, Daily Telegraph
Although not included in the Kyoto Protocol, the maritime industry’s CO2 emissions rival those of aviation. But new initiatives from port authorities look set to make shipping more eco-friendly. Jimmy Lee Shreeve reports “Commercial shipping emissions have been one of the least studied areas of all combustion emissions,” says Daniel Lack, a scientist at the Washington DC-based National Oceanic and Atmospheric Administration (NOAA).

He’s right. But it isn’t just formal studies that are lacking. Shipping, like aviation, plays a major role in the global economy and is also a big contributor to greenhouse gas emissions.

Yet it has never been included in progammes like the Kyoto Protocol. As a result, its impact on the environment goes largely unreported.

Daniel Lack and his team, however, have uncovered damning evidence showing that emissions from shipping are worse than previously thought.
(22 July 2008)
The cost of shipping items thousands of miles to reduce labor costs has not so far been balanced against the environmental cost of the shipping. With the economic cost also increasing (see below) there is increasing pause for thought-SO

Will soaring transport costs reverse globalization?

Jeff Rubin and Benjamin Tal, CIBC World Markets Inc.
Over the last three years, every one dollar rise in world oil prices has fed directly into a 1% rise in transport costs…

…At today’s oil prices, every 10% increase in trip distance translates into a 4.5% increase in transport costs.The duration of a typical sea voyage from China to North America is four weeks. Including inland costs, shipping a standard 40-foot container from Shanghai to the US eastern seaboard now costs $8,000. In 2000, when oil prices were $20 per barrel, it cost only $3,000 to ship the same container. But at $200 per barrel, it will soon cost $15,000 in transport costs to ship from China to the US eastern seaboard.

Soaring transport costs suggest trade should be both dampened and diverted as markets seek shorter, and hence, less costly supply lines. And that’s precisely what we have witnessed in response to past OPEC oil shocks…

…Take the steel sector for example. With little over an hour and a half of labor time embodied in the production of a ton of steel, and relatively high freight costs, the global cost curve of the steel sector is changing rapidly.Even at today’s oil prices, rising transport costs have already more than offset China’s otherwise slim cost advantage, giving US steel a competitive advantage in its own market for the first time in over a decade (Chart 5).

The rapidly changing economics of steel is already reflected in the trade statistics. China’s steel exports to the US are now falling by more than 20% on a year-over- year basis—the worst performance in almost a decade. While many might attribute this decline to the slowdown in the US economy, it is noteworthy that US domestic steel production has risen by almost 10% during the same period…

…And there is already evidence that Chinese exports of freight-intensive goods are already beginning to slow under the pressure of rapidly rising transport costs.

While there has been a general slowdown in export growth to the US over the past year, it is notable that the slowdown is far more pronounced in goods that carry relatively high freight costs compared to those that do not. On a year-over year basis, this category is now falling for the first time in more than 10 years (Chart 7). Freight-sensitive Chinese exports to the US now account for 42% of total exports—down from 52% in 2004. In fact, we estimate that if it were not for the dramatic increase in transport costs, growth in Chinese exports to the US since 2004 would have been 30% stronger than the actual tally.

…In that type of world, look for Mexico’s maquiladora plants to get another chance at bat when it comes to supplying the North American market. In a world where oil will soon cost over $200 per barrel, Mexico’s proximity to the rest of North America gives its costs a huge advantage.American importers are already shifting some business from China to Mexico. While the pace of shipments from China to the US is slowing—mainly among freight-intensive goods, even non-energy Mexican exports to the US are still rising at a healthy annual rate of more than 7%…
(27 May 2008)
Contributor, ‘driller’, comments: Any surprise that Chinese economy has been slowing down recently? China Daily assigns this to investors waiting for the time after the Olympics. Let’s wait and see…