The cost to ship a container across the Pacific Ocean from Shanghai to LA is down, from more than $5,000 at the start of the year, to about $2,000 now, according to the freight pricing firm Xeneta.
That big drop is, of course, a signal about the state of global trade. Ship owners seem to be taking note, because they’re ordering fewer boats.
New vessel orders were down more than 50% in the first half of this year, compared to the first half last year, according to Clarksons, a ship brokerage.
The sagging demand for new ships comes just as policymakers here in the U.S. are trying to revive America’s shipyards.
For Cynthia Cook, with the Center for Strategic and International Studies, ship building is a key indicator.
“Ship orders are directly linked to expectations about global commerce,” Cook said.
If ship owners don’t see much future demand for moving stuff around the world, there will be a reaction.
“They’re not gonna order ships,” Cook said. “Simple as that.”
Right now, they’re not ordering ships, said shipping investor Ed Finley-Richardson.
“The decline is quite remarkable. Let’s say, compared to a 10-year average, we are way below average ordering,” said Finley-Richardson. “So, we’re down more than 90% for car carriers for example.”
Orders for dry bulk carriers and oil tankers are also down. That’s in part due to tariffs and rising trade tensions.
“If you order a vessel now, you probably won’t get it in three or four years,” said Finley-Richardon. “That means that you really have to be sure of what the economy’s gonna look like then.”
A single new tanker ship can cost north of $100 million.
“So, it’s a big bet with a lot of uncertainty,” Finley-Richardson said.
Ups and downs are nothing new for ship builders, said Brian Potter, an infrastructure researcher at the Institute for Progress.
“The market is so, so cyclical that it’s not surprising to see big, huge swings,” Potter said.
Those swings usually connect to what’s happening elsewhere in the global economy. In the early 2000s, orders for new ships skyrocketed, as China traded more and more with the world. However, it didn’t stay that way.
“After the financial crisis in 2008, 2009, you see a huge decline,” Potter said.
Today in the U.S., there’s a bipartisan push to revive the country’s nearly extinct commercial shipbuilding industry. But Finley-Richardson said that effort is hindered by more than just geopolitics.
“It’s getting harder and harder to find skilled labor,” Finley-Richardson said. “This is really the bottleneck for U.S. shipbuilding. It’s unclear who is gonna be the welder in those yards.”
That bottleneck, could last beyond the current trade war.