Fri. Sep 17th, 2021


Supply Chain Updates

Do you have any idea how many containers turn well on the outside of Shanghai to Rotterdam, bake on baking farms or collect diesel smoke film in traffic jams?

Of course not. No one does. The stock traveling around the world resists the imagination, not to mention the ancient information systems in the shipping industry.

All this well-tracked and delayed stuff, when it finally ends up where it was supposed to, seems to create a big enough hope to cause a bad inventory recession, where demand for goods drops while the accumulated inventory runs out. The suppliers of the supply chain I interviewed believe that the Chinese New Year will be more or less ironed out by the port, unavailable trucks, restrictions on Covid-19 and unskilled warehouse staff.

This is on February 1 of next year. So you have a good idea of ​​when the North American economy will take a dive. It looks like China has already slowed down. The words “Europe” and “boom” have long been linked.

The public perception of the causes of recessions has flown away from the idea of ​​buying an abundance of goods. Most people will blame Wall Street or the political party for power in their country. Or maybe the opposition, because it slows down the implementation of policies.

A few contemporary central bank economists have quickly explored the possible role of inventory adjustments in recent recessions. But that will not be the headline of the central bankers’ turn in Jackson Hole, Wyoming, late August

A stock recession on the horizon? No, it indicates that public finances do not have ‘control’ over all the ‘tools’ they need. But what can the US Federal Reserve or the European Central Bank do about the double and triple order caused by the retirement of truck drivers and the standstill of the bridge? Buy two containers of rubber bath ducks if the retail customers only wanted one? It would be a truly unconventional program for buying assets.

Eventually, however, container ship owners can enter through the front door without being grabbed by the creditors’ marshals. Every operator in the chain is ultimately cash rich. As one logistics analyst put it: “For me, the more chaos, the better.”

Hamburg shipbroker Harper Petersen & Co reports that its Harpex vessel shipping rate index rose from 1,154 at the beginning of the year to 3,143. Shipping companies have new and enthusiastic sources of financing for new constructions, a good thing since the withdrawal of German ship investors over the past decade.

Container owners devise it. As Lars Jensen of Vespucci Maritime in Copenhagen points out: “Under normal circumstances. a container goes over 35 days from the factory in Shanghai to Chicago. It now takes up to 73 days, and then the same container must be returned (usually empty). Not surprisingly, the location for containers from China to the US west coast has risen in the past few weeks from about $ 4,000 or so at the beginning of the year to almost $ 10,000.

Of course, most deliveries and shipping companies do not want to pay fixed rates. Triton International, a U.S.-listed container rental company that owns about 40 percent of the container market, had net income of $ 144.2 million in the second quarter, up 148 percent from the same quarter last year. The company eventually got an investment grade (triple B minus), and it did, even though it ordered more than 1.1 million TEU (20 foot container equivalent units) new boxes to contribute to the 7 million they already have on hand had.

Thanks to the desperate demand for holders, Brian Sondey, CEO of Triton, said the company could roughly match the term of new leases (13 years) with the accounting assumptions of the life of the asset. And since the shipping companies’ credit has improved with their current high revenues, the counterparty risk has decreased.

Sondey is philosophical about the inevitable turn in the market and sources of some of the current demand. “Professor Sterman was absolutely right about the dynamics of the supply chain,” he said. John Sterman, of the Massachusetts Institute of Technology, is best known for modeling storage and “phantom ordering” among participants in supply chains, even though the behavior is irrational.

During the upcoming supply chain engagement, participants can start gathering a little more information about what will come where and when. This may help to dampen the recessions in stock in the future.



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