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How Our Dependence on Global Shipping Will Come Back to Bite Us
How Our Dependence on Global Shipping Will Come Back to Bite Us
If the general public understood how vulnerable our reliance on global shipping made us, they’d all become preppers overnight. Trucks, planes, and cargo ships are responsible for just about everything modern life depends upon. This reliance on global goods and long-distance shipping puts us all at risk.
Our Dependence Upon Global Shipping
Modern shipping keeps us clothed and fed. It brings us necessary medicines, fuel to the pumps, and delivers chemicals necessary to municipal water treatment plants. It is truly amazing how seamless it all appears to the average consumer, especially considering shipping’s global scale.
That is until there is a problem. Problems can be anything from a trucker’s strike to a plane crashing to a cyber attack shutting down the largest global shipping company.
Global shipping is a necessary evil in a world where we rely on global goods. When companies take their manufacturing operations overseas, the first thing we think of is lost jobs. But, we also put access to those goods at risk. Some of these risks include:
- Relations with China breaking down over North Korea.
- Hackers taking down software (navigation, customer orders, inventory tracking, systems diagnostics, etc) on ships, planes, trucks, and at ports and command centers.
- An EMP causing all electronic systems to cease working.
- Employees of shipping companies across an industry going on an extended strike.
- Deteriorating domestic infrastructure interfering with the delivery of goods.
- War/terrorism anywhere in the world causing delays and lost shipments of imports/exports.
Just a 24-Hour Delay Causes Shortages
A perfect example of this is shipping fresh food to Alaska all year long. Alaskan grocery stores do what they can to stock Alaska-grown items on their shelves, but due to the climate, Alaskans rely on imported produce and goods. The Anchorage Daily News reported on the impact of a single ship being delayed by just 24 hours for a repair.
…click on the above link to read the rest of the article…
The Baltic Dry Shipping Index Just Collapsed To An All-Time Record Low
The Baltic Dry Shipping Index Just Collapsed To An All-Time Record Low
I was absolutely stunned to learn that the Baltic Dry Shipping Index had plummeted to a new all-time record low of 504 at one point on Thursday. I have written a number of articles lately about the dramatic slowdown in global trade, but I didn’t realize that things had gotten quite this bad already. Not even during the darkest moments of the last financial crisis did the Baltic Dry Shipping Index drop this low. Something doesn’t seem to be adding up, because the mainstream media keeps telling us that the global economy is doing just fine. In fact, the Federal Reserve is so confident in our “economic recovery” that they are getting ready to raise interest rates. Of course the truth is that there is no “economic recovery” on the horizon. In fact, as I wrote about yesterday, there are signs all around us that are indicating that we are heading directly into another major economic crisis. This staggering decline of the Baltic Dry Shipping Index is just another confirmation of what is directly ahead of us.
Overall, the Baltic Dry Index is down more than 60 percent over the past 12 months. Global demand for shipping is absolutely collapsing, and yet very few “experts” seem alarmed by this. If you are not familiar with the Baltic Dry Shipping Index, the following is a pretty good definition from Investopedia…
A shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea. The Baltic Exchange directly contacts shipping brokers to assess price levels for a given route, product to transport and time to delivery (speed).
…click on the above link to read the rest of the article…
Shanghai Containerized Freight Index Totally Collapses, Top Carriers Wage Price War to Form Global Shipping Oligopoly
Shanghai Containerized Freight Index Totally Collapses, Top Carriers Wage Price War to Form Global Shipping Oligopoly
This is what two unnamed container shipping executives, one from an Asian carrier, the other from a European carrier, told the Wall Street Journal about the containerized-freight fiasco on the China-Europe route:
“We are now shipping at an absolute loss. With the bunker-adjustment-factor surcharge at $300 for Asia-Europe, we are losing more than $50 per box.”
“Unless by a miracle demand grows, we are up for heavy losses in the next quarter and maybe the rest of 2015.”
The rate for shipping a container on that route, after plunging for months, is now below even the cost of fuel.
The China Containerized Freight Index (CCFI), which covers spot market rates and contractual rates from Chinese ports to major destinations around the world, dropped another 1.2% last week, to a multi-year low of 851.4. The China-Europe component dropped 2.5%. The CCFI is now 21% below where it was in February, and 15% below where it was in 1998, when it was set at 1,000!
The Shanghai Containerized Freight Index (SCFI) paints an even drearier scenario. Unlike the CCFI, it is composed only of spot rates, not contractual rates, from Shanghai to the rest of the world. And this babe plunged 6.8% last week to 581.25, an all-time low, 42% below where it was during the Financial Crisis, on October 16, 2009, when it was set at 1,000, and down 47% from February.
This is what the four-month plunge looks like:
The Shanghai-Rotterdam sub-index plunged 14.4% last week to an all-time low of $243 per twenty-foot equivalent unit (TEU). Rates began to collapse in February. By April, when they’d crashed to around $400 per TEU, Drewry Maritime Researchestimated that the break-even rate for most carriers was $800 per TEU on that route. But now, the rates, at $243 per TEU, don’t even cover the cost of fuel of about $300 per TEU. Hence the screaming by the shipping execs!
…click on the above link to read the rest of the article…
