World News Random, Random

[MJ2004]

An update:



And of course, there is just no comparison between trade levels in 1975 versus now. Present-day impact is incomparably larger.

[MJ2004]

Suez blockage prompts shipping angst over piracy threat
Companies call US Navy over dangers as they grapple with questions about rerouting vessels

Shipping companies have contacted the US Navy about the potentially elevated threat of piracy to rerouted vessels after a container ship ran aground and could block the Suez Canal for weeks.

Asian shipping associations confirmed the concerns as they contemplate anchoring billions of dollars of cargo at sea or taking other lengthy — and potentially risky — routes around Africa. Zhao Qing-feng, office manager of the China Shipowners’ Association based in Shanghai, said on Friday that potentially rerouting vessels included security considerations.

“Africa has the risk of piracy, especially in east Africa,” he said, adding that shipping companies might need to hire extra security officers.

Rolf Habben Jansen, chief executive of Hapag-Lloyd, the world’s fifth-largest container carrier, warned there was “nothing we can do” about cargo stuck on vessels outside the Suez Canal and the company’s focus was to get ships to their intended destinations as soon as possible.

But Peter Sand, chief shipping analyst at Bimco, said some ships could head “to a nearby port like Djibouti” to air freight components or goods in an effort to limit the impact on certain manufacturing supply chains.

While east Africa has long been known for piracy, there has been a surge in kidnappings at sea and other maritime crimes in west Africa in recent months.

Dimitris Maniatis, chief commercial officer of Seagull Maritime Security, a provider of ship guards, said that private security would cost between $5,000 to $10,000 per vessel if those waiting at the southern entrance of the Suez Canal needed to turn back and sail through the Gulf of Aden.

He added that vessels rerouted to bypass the Suez Canal and travel around South Africa’s Cape of Good Hope would steer well clear of dangerous areas off the coast of west Africa.

The US Navy told the Financial Times there had not yet been an impact on naval operations in the region, but companies were concerned that if the blockage continued, their vessels could face risks.

James Wroe, head of liner operations at Maersk Asia Pacific, wrote on social media that the decision of whether to reroute was a “roll of the dice”.

Jansen said three vessels in its alliance with other shipping companies had been diverted. The Ever Greet, sister ship to the Ever Given, the vessel stuck in the canal, has also been diverted. Shipbrokers in Singapore and Tokyo said similar rerouting decisions were “imminent” on a number of oil tankers and other vessels.

Vessels travelling from Singapore to Rotterdam via the Cape of Good Hope faced additional costs of $400,000 per vessel for a full voyage said Anoop Singh, head of tanker research at shipbroker Braemar ACM. 

Shipping companies estimated that almost 200 vessels were stranded on either side of the Suez Canal, the chokepoint through which about 12 per cent of global trade flows. The route is critical for oil, gas and high-demand food commodities such as coffee.

Several Asian carmakers rely on the route to transport parts bound for European factories, raising the possibility of plant stoppages across the UK and Europe in an extended blockage.

Nissan, which said it was “assessing the impact on our operations”, confirmed it used the Suez Canal for all of its ocean shipments to Europe from Asia. Honda also said it was monitoring the situation.

Because of the sheer number of parts they use, carmakers hold very little stock, instead relying on “just in time” delivery of components. Delays at sea often see carmakers turn to expensive air freighting of parts as an emergency measure.

The warnings came as shipping operators’ stocks jumped on the prospect of higher freight rates, as industry executives contemplated rerouting cargo around southern Africa, which would add at least seven days and potentially force the cancellation of other scheduled routes.

Shares in Maersk, the world’s largest container group, gained about 4 per cent, following Asian peers higher, including a 16 per cent bump for South Korea’s Hyundai Merchant Marine after salvage experts indicated it could take weeks to dislodge the 400-metre Ever Given from the banks of the Suez Canal.

Dutch and Japanese salvage specialists have produced a variety of theories for how best to free the Ever Given, a formidable technical challenge that has been complicated by poor weather. Nippon Salvage, which is part of the rescue efforts, declined to comment.

An official at Shoei Kisen Kaisha, the Japanese owner of the Ever Given, said it was focusing on dislodging the container ship but added that resolving the situation remained “extremely difficult”. Jansen predicted it would “at least take a few weeks” for congestion at the Suez Canal to ease even if the ship is refloated soon.

“The market is betting that the issue might go on for a while,” said Kim Youngho, an analyst at Samsung Securities. “If you detour to the Cape of Good Hope, it will probably take at least one more week to reach the Netherlands from Shanghai . . . if you have to detour it should raise current freight rates further.”

- FT

[JazzNU]

Global shipping was in chaos even before the Suez blockage. Shortages and higher prices loom

By Hanna Ziady

One of the world's most vital trade arteries has been blocked by a quarter-mile-long container ship, creating a traffic jam that has ensnared over 200 vessels and could take weeks to clear.

But even before the Ever Given ran aground in the Suez Canal earlier this week, global supply chains were being stretched to the limits, making it much more expensive to move goods around the world and causing shortages of everything from exercise bikes to cheese at a time of unprecedented demand.

A prolonged closure of the key route between West and East could make matters much worse. Costly delays or diversions to longer routes will heap pressure on businesses that are already facing container shortages, port congestion and capacity constraints.

The grounding of the Ever Given is delaying shipments of consumer goods from Asia to Europe and North America, and agricultural products moving in the opposite direction. As of Friday, some 237 vessels, including oil tankers and dozens of container ships, were waiting to transit the canal, which handles about 12% of global trade.

"There's been a great convergence of constraints in supply chains like I've never seen before," said Bob Biesterfeld, the CEO of C.H. Robinson, one of the world's largest logistics firms. The bottlenecks are widespread, affecting transport by air, ocean and road, Biesterfeld told CNN Business in an interview. "It really has been unprecedented."

Freight costs soaring

More than 80% of global trade by volume is moved by sea, and the disruptions are adding billions of dollars to supply chain costs. Globally, the average cost to ship a 40-foot container shot up from $1,040 last June to $4,570 on March 1, according to S&P Global Platts.

Those costs add up. In February, container shipping costs for seaborne US goods imports totaled $5.2 billion, compared to $2 billion during the same month in 2020, according to S&P Global Panjiva.

These expenses could soon mean higher prices for consumers, adding upward pressure to rising inflation — a nightmare scenario for Wall Street, which is already fearful that a spike in prices could force the Federal Reserve to hike interest rates sooner than expected.

"At the moment a lot of these costs are within the supply chains," said Chris Rogers, a research analyst at S&P Global Panjiva. "I think it's inevitable that it will be passed on to consumers — it's just going to take time," he added.

The coronavirus wreaked havoc on global supply chains last year, as lockdowns temporarily closed factories and disrupted the normal flow of trade. Economic activity slowed dramatically at the start of the pandemic, and the rapid rebound in trade volumes that followed caught companies off guard.

A pickup in manufacturing and seemingly insatiable demand from housebound consumers for goods such as televisions, furniture and exercise bikes has stretched suppliers and made it difficult for consumers to find the products they'd like to buy.

Manufacturers have also struggled to secure crucial components. Major carmakers, including Ford (F) and Volkswagen (VLKAF), have been forced to idle factories because of a shortage of computer chips caused by high demand for smartphones, gaming systems and other tech gadgets.

"One year ago, global trade slowed to a crawl as the Covid-19 pandemic first hit China and then spread worldwide," Gene Seroka, executive director at the Port of Los Angeles, said in a presentation this month. "Today, we are in the seventh month of a historic import surge, driven by unprecedented demand by American consumers," he added.

US seaborne imports were nearly 30% higher in February than the same month last year and 20% up on February 2019, according to S&P Global Panjiva.

The import surge in the United States and elsewhere has led to a worldwide container shortage. Everything from cars and machinery to apparel and other consumer staples are shipped in these metal boxes. The factories that make them are mostly in China and many of them closed early in the pandemic, slowing down the rate at which new capacity was coming on stream, according to Rogers.

Containers are in all the wrong places

China's exports recovered fairly quickly compared to the rest of the world. At the same time, major shipping lines had canceled dozens of sailings to respond to the earlier lull in trade. The result was that empty containers piled up in all the wrong places and couldn't meet the sudden demand in Europe and North America for Asia-made goods.

Hapag-Lloyd (HPGLY), one of the world's largest container shipping lines, has deployed about 52 additional vessels just to move hundreds of thousands of empty containers to where they're needed most. In more normal times, there would be fewer than 10.

"That's in reality about a ship a week that's doing nothing more than moving empty containers," CEO Rolf Habben Jansen told investors on a call last week.

The influx of imports has compounded problems at choked up ports, which are contending with labor shortages due to Covid-19 and a slowdown in operations caused by social distancing measures and quarantines.

On Wednesday, there were two dozen vessels at anchor awaiting entry into either the Port of Los Angeles or the neighboring Port of Long Beach, according to Port of Los Angeles spokesperson, Phillip Sanfield.

"At the Port of Los Angeles, we are actively working on an additional 17 container ships," Sanfield told CNN Business. "Pre-pandemic, we would be working about 10 container ships with no container ships waiting to enter."

The port processed the equivalent of nearly 800,000 20-foot containers last month — the busiest February in its 114-year history.

Companies feel the strain

Companies from Under Armour (UA) and Hasbro (HAS) to Dollar Tree (DLTR), Urban Outfitters (URBN) and Crocs (CROX) have all warned about the supply chain crunch recently, pointing to container shortages, port congestion, rising shipping costs and logistics challenges.
Costco (COST) said earlier this month that it was having trouble stocking imported cheeses because of a shortage of shipping containers and bottlenecks.

An analysis of 7,000 company earnings calls globally in January and February by S&P Global Panjiva found that more than a quarter mentioned "freight," 37% mentioned "logistics" and half discussed supply chains.

"We know that the freight pressure across retail is here to stay and we've built that into our future plans," Mark Tritton, the CEO of Bed Bath & Beyond (BBBY), told investors in January.

Aston Chemicals, a UK company that supplies European manufacturers of personal care products, said its shipping costs were 6.5 times more expensive in January compared to November.

"We paid almost $14,000 for a container in January," said managing director Dani Loughran. That was for a shipment from Malaysia to the port of Felixstowe in England, which just two months earlier had cost $2,100.

Peloton blamed US West Coast port delays for causing "longer than acceptable wait times" for the delivery of its high-end exercise bikes. The company told shareholders in February that it's investing over $100 million to expedite deliveries by air and sea over the next six months to improve delivery times.

It's not the only firm resorting to airplanes to move goods that would ordinarily come by boat, as companies scramble to keep up with customer demand.

According to Biesterfeld of C.H. Robinson, a number of durable goods typically transported in shipping containers are being carried in planes, such as toys and games. Companies are "choosing air freight because inventories are so low," he said.

Air freight is more expensive than ocean freight even under normal circumstances and therefore reserved for high-value goods. These costs are even higher at the moment because fewer flights carrying travelers means less available capacity to transport goods, a chunk of which are typically carried in the bellies of passenger planes.

That will only add to the costs facing businesses and could trickle down to consumers before long.

Higher prices on the way

Companies have so far said very little about how they plan to respond to soaring freight rates but there are early signs that import prices are rising. According to the Bureau of Labor Statistics, US import prices experienced their largest monthly increase in January since March 2012.

"We anticipate strong demand from consumers to continue over the next couple of months and don't see meaningful change in capacity over that short time period," said Biesterfeld.

The cost to move goods by air, ocean, truck and train is now "structurally up" on 2019 and contracts reflect that, he added. "I do think the costs are real and eventually will manifest themselves for consumers," he said.

The extent to which this feeds through to consumer prices will vary from one product to the next. Goods that rely more heavily on imported components will likely cost more. At the same time, if the cost of imported goods rises significantly or these products become less readily available, that could give domestic producers more leeway to increase prices, said Joanna Konings, a senior economist at ING.

Commerzbank analysts said in a note to clients on Friday that the Suez snarl up could cause oil to become more expensive for consumers because of higher tanker rates as a result of the incident.

For Aston Chemicals, the cost increases were so severe that the only option was to pass them on to their customers: businesses that make everyday products such as shampoos, moisturizers and cosmetics.

If those companies in turn decide to hike prices for their customers, in this case retailers, consumers could start to feel the pinch soon, said Konings.
"Most prices along the supply chain have gone in one direction, and that's up, so it has to appear somewhere."

https://www.cnn.com/2021/03/26/business ... index.html

[ponchi101]

So, who will win? Production costs will go up because of the disruption, but consumer purchasing power is down due to low consumer income. So, when supply and demand kicks in, where will the chain break?

[ti-amie]

So, who will win? Production costs will go up because of the disruption, but consumer purchasing power is down due to low consumer income. So, when supply and demand kicks in, where will the chain break?

Meanwhile the folks on Twitter don't see what the problem is? They've got solutions that I'm sure the professionals haven't thought of... /s

[Suliso]

Eventually they will refloat it, but it might require removing all or most of containers. If so that will take a couple of weeks.

All this will make shipping more expensive, but will not greatly hinder it.

[ti-amie]

[the Moz]

Maybe James Cameron can help with the salvage operation

[JazzNU]

[ti-amie]

I don't understand what the navigator was doing. Whatever it was it looks as if he should've been relieved of duty.

Reading is fundamental. They're saying it was an equipment failure. I know it's hard to stop a ship that big (I went on a tour of an air craft carrier) but couldn't they have slowed it?

[ponchi101]

A ship that big will not respond to any maneuver set in the bridge in less than 15-20 minutes. One command or change of rudder will only affect the real movement of the ship 20-30 minutes later. The way it looks, it seems that the navigator compensated, saw no response, panicked and over compensated again.
When we work on boats we have to navigate extremely narrow lanes. The changes in the bridge are minute, and we usually enter our lanes a good 5-6 miles prior to the initial point. Of course, we are carrying kilometers of cable behind us so we need to ensure we enter the lane already in a straight line.
Might have been a combo: too much wind, an inexperienced captain/navigator. Neither man will be finding work any time soon.

[ti-amie]

What do you think about this ponchi?

@jsrailton
How soon till one of the big Dutch salvage companies shows up for an ultra-premium re-floating?

[ti-amie]

Full image if you don't want to click on the Twitter link.

[ponchi101]

What do you think about this ponchi?

@jsrailton
How soon till one of the big Dutch salvage companies shows up for an ultra-premium re-floating?

The world's largest salvage companies already have a huge presence in the Gulf. Jebel Ali is the largest man made port in the world (Dubai). Sharm El Sheikh is also monstrous. It is not as if that area of the world does not know about boats.

[ti-amie]