Impact of Brexit and COVID-19 on Shipping Costs and Port Congestion

This presentation discusses the impact of Brexit and COVID-19 on shipping costs and port congestion, focusing on the rising prices of outdoor toys due to high transportation costs and port congestion. Microeconomic concepts such as demand and supply, market structure, costs and production, economic profit, and elasticity are discussed.

Business Environment

Contents
• Introduction
• Overview of the article
• Demand and supply
• Market structure
• Economic profit and business organization
• Costs and production
• Elasticity
• Conclusion
• References

Introduction
 Brexit has caused a range of issues for businesses resulting in fluctuations in demand and supply models
as well as caused shipping problems.
 The purpose of this presentation is to reflect upon the issues of soaring shipping costs resulting in high
prices of outdoor large toys such as trampoline and other swings.
 The presentation is based on understanding of economic concpets and how economic factors affects rising
prices as well as long term consequences of brexit.
 In this presentation the aspects of microeconomic theories are discussed related to the extract.
 It further reflects on economic issues and theories such as demand and supply models

Overview of the article
 The article mainly focus upon estimated high
prices of trampoline as said by owner of large
swings and outdoor toys which is mainly due to
issues of high transportation costs as well as port
congestion.
 According to a game retailer james owen who is
owner of outdoor toys stated that due to rising
prices of transportation and worsening
situatioins of port congestion implying increase
in prices of large toys as ships are not having
enough capacity to load these large sized items.

Continue
 He further stated that in some cases prices of shipping is even higher than the original cost of the item.
Issues are keep rising because of high climbing in rates due to port congestion.
 The increasing demands are resulting in high increase in shipping costs and it is also been observed that
ocean freight is outweighing the cost of the item.

Continue
 The main microeconomic concepts and theroies that are being outlined in this article is the issue of rising
shipping prices and port congestion because of high demand.
 Demand for chinese goods have rised all around the world which is having serious implications placing a
severe strain on existing shipping capacities.

Continue
 The prices are almost tripled on major world trade routes since a year ago of shipping a 40-foot container.
 The rates of hauler have also increased and they are charging high rates due to increase in demands.
 The cost of hauling a container has reached to 1800 euros if the retailers can't made it through haulers.
 The trends are emerging among Irish hauliers to bypass welsh ports for the purpose of avoiding
bureaucratic conditions of brexit implications.

Demand and supply
 Demand and Supply refers to the relationship existing between quantity that is expected by consumers of
a commodity which manufacturers are willing to sell at different prices and individuals are willing to buy.
 The article discuss the major issues of high transportation costs and port congestion which is critically
related to demand and supply models.
 Transportation prices and shipping costs are directly associated with demand and supply of commodities
which reduce their capacities to carry goods from one place to another.

Continue
 Since the demand of chinese goods are increasing and skyrocketting, the capacities of loading
commodities are getting low implying the conditions of port congestion.
 These situations are worsening and causing strain on economy due to increase in demand and measures
which are takent to combat the consequences of covid-19 which disrupted the whole supply chain.

Continue
 Demand refers to the quantity of commodities that consumers are willing to buy at different prices during
a given period of time.
 Demand is directly linked with various factors of economy and changes in demand as well as supply
models are likely to cause a range of microeconomic issues.
 Businesses are impacted greatly by changes in demand which has occured greatly due to the emergence of
pandemic.

Continue
 The pandemic has caused disruption in supply chains which is being reflecting in high shipping costs.
 Moroever due to increasing demand shipping loading capacities are increasing implying port congestion.
 Increasing demands as well as shortage of empty containers are causing great disturbance in the process
of distribution.

Market structure
 Market structure refers to the patterns according to which industries are categorised and differentiated on
the basis of their degrees as well as existing nature of competition among commodities. There are mainly
four market structures that are perfect competition, monopolistic competition, oligopoly and monopoly.
 The implications of pandemic and Brexit has caused great disturbances in market structures through
causing major regulations in trading resulting in a range of microeconomic issues.
 Covid-19 has promoted monopoly in markets providing organisations and companies with less options to
avail services from.

Continue
 The shipping industry is one of the major sector which suffered a great deal due to the
implications of COVID-19 disrupting market structures of various heavy items.
 Beside this, Brexit has resulted in a great deal of cross-border friction which has caused major
increase in costs involved in movement of goods from one nation to another.

Costs and production
 It is one of the main economic concepts where costs refers to the expenses incurred on manufacturing and
creation of commodities. Cost and production are inversely related as when something is harder to produce,
it takes more time as well as labour thus resulting in huge costs.
 The implications of pandemic has served major consequences bringing halt in the production capacity
during 2020 which implied businesses to extend their manufacturing activities in order to meet with
skyrocketing demands of individuals.
 Customers are expecting delivery of goods to several locations which are encouraging split shipments due to
rise in online purchases which all are contributing in high increase in shipping costs.

Continue
 High demands of consumers are promoting split shipments to a great extent and it is resulting in reducing
capacities of ships to load commodities.
 The growing rates of shipments are implying skyrocketing prices in the process of distribution through
shipping materials.

Economic profit and business
organisation
 Economic profit refers to the outcome attained by
deduction of both opportunity as well as explicit costs
from earnings of a business organisation. Business
enterprises use economic profits for internal analysis
and is not needed for the purpose of transparent
disclosure.
 The impact of Brexit is major on trade of UK as now
the nation is unable to avail under the umbrella of
European union.
 This leads to complications and has multiplied the
rates of freight due to complications in supply chain.

Continue
 Apart from this, the reasons behind surging prices of shipping goods is due to the increase in demands of
containers in China. Since, china is the largest importer in whole world, western European countries relies
heavily on China for various goods and commodities.
 And thus the countries are willing to pay any prices demanded in order to import goods through china.
Trampoline being imported from china are causing high increase in shipping costs as they are large in size
which further requires high capacity to load such commodities for the purpose of transportation.

Elasticity
• Elasticity refers to the general measure on how a economic variable responds to the changes in another
economic variable. It is an major economic concept which refers to the changes which happens in demands
as a result of change in price movements of that particular commodity.
• In the context of trampoline, increase in prices of trampoline will likely to reduce the demands of the
trampoline.

Continue
 Also the availability of containers is less thus implying huge demand of containers in china along with
extreme increase in freight rates.
 The pandemic has caused a severe disturbance in market structures implying high rates of shipping and
transportation costs along with the problem of port congestion.

Continue
 The pandemic has stopped the production which implied less supply in the year 2020 and the sudden
termination of flow of production has caused higher demands after gradual release in COVID-19
restrictions.
 The cost of trampolines will likely to rise as increasing demand and inefficient supply management has
caused increase in shipping prices worsening the scenario. The shortage of containers has implied port
congestion and now haulers are charging high in order to deal with situations.

Conclusion
From this presentation, it has been concluded that Brexit implications and COVID-19 impacts have caused
disturbances in demand and supply models which has resulted in rise in prices of shipping transportation and
further created the problem of port congestion. Due to increase in prices of shipping goods, ocean freight has
almost doubled than the original cost of a commodity. In order to combat with these challenges, businesses
have to plan strategically for promoting advance shipments. Timings plays an important role and the owner of
large toys must plan their shipments according to that in the way through making shipments on less busy days
such as Monday or Friday. Moreover, the element of packaging is important in deciding costs of shipments,
therefore swings owners must attempt at avoiding over-packaging their items. In addition to this, smaller
retailers must also take advantage of promoting distribution through integrated transportation partners for the
purpose of shipments as this will benefit them from outsourcing and they would be able to focus upon their
operations completely.

References
 Oxford Analytica, Rising power prices raise risk of economic instability. Emerald Expert Briefings,
(oxan-db).
 Ghaderi, H., 2019. Autonomous technologies in short sea shipping: trends, feasibility and implications.
Transport Reviews, 39(1), pp.152-173.
 Inman, R.R. and Bhaskaran, S., 2019. Empirical evaluation of the delivery risk of extended supply
chains. International Journal of Production Research, 57(11), pp.3466-3477.
 Li, D., Qu, Y. and Ma, Y., 2020. Study on the impact of subsidies for overlapping hinterland shippers on
port competition. Transportation Research Part A: Policy and Practice, 135, pp.24-37.
 Wan, Y., Zhang, A. and Li, K.X., 2018. Port competition with accessibility and congestion: a theoretical
framework and literature review on empirical studies. Maritime Policy & Management, 45(2), pp.239-
259.
 Jiang, C. and et.al., 2021. Vertical integration and capacity investment in a two-port system.
Transportmetrica A: Transport Science, 17(4), pp.1431-1459.
 Pruyn, J.F.J., Kana, A.A. and Groeneveld, W.M., 2020. Analysis of port waiting time due to congestion
by applying Markov chain analysis. In Maritime Supply Chains (pp. 69-94). Elsevier.