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In the wake of a rapidly evolving realignment of the world trading system resulting from the economic equivalent of World War III, President Joe Biden last week took the first of what are likely to be many steps toward building greater self-sufficiency for the United States.

Biden called for increasing U.S. production of key minerals used in the manufacture of electric vehicle batteries. He invoked the Defense Production Act which allows the government to support production of certain materials and goods deemed essential for national defense and even to order industry to mine minerals and make machinery including vehicles such as tanks and bombs.

For the Biden administration its first small step toward U.S. self-sufficiency consists of making companies which mine minerals key to electric vehicle batteries such as lithium, nickel, graphite, cobalt and manganese eligible for direct subsidies or purchase commitments to incentivize increased production. The applicable program (called Title III) has about $750 million to spend, not that much to rectify what is a huge deficit.

It’s worth looking at U.S. net imports of each of these minerals to understand just how hard reaching self-sufficiency will be. For starters, let’s examine a table from a U.S. Geological Survey (USGS) report about U.S. import dependence for key minerals:

USGS Minerals Table
Of the five minerals listed above, the United States is 100 percent dependent on imports for two: graphite and manganese. (It’s worth noting the China, Russia and Ukraine are among the top six producers of graphite and China is the largest producer by far. China and Ukraine are among the top five producers of manganese and again China is by far the biggest producer.)

Complete U.S. dependence on imports implies that there is no current production of these minerals in the United States and that nobody has even been looking for these minerals on U.S. soil…

…click on the above link to read the rest of the article…

Imports take ‘dramatically longer’ to reach US as bottlenecks bite

January 21, 2022

Imports take ‘dramatically longer’ to reach US as bottlenecks bite

Indicators on trans-Pacific delivery time are all trending in the wrong direction

container shipping — Port of Long Beach (Photo: Shutterstock/Gagliard Photography)

Planning to import goods from Asia by ocean and sell them in America this summer? Better act fast. The trans-Pacific cargo move can now take over three months. According to multiple sources, average transit times have risen to double pre-COVID levels — and they’re still increasing.

Methodologies and data sources differ, so time estimates vary. But each dataset shows the same trend: With every passing month, more vessels, container equipment and goods inventories are getting waylaid in the Pacific.

Flexport

Flexport launched its weekly Ocean Timeliness Indicator (OTI) in early December. The OTI uses data from Flexport’s freight forwarding customers back to March 2019, measuring the time from the cargo-ready date at the exporters’ gate to the date when products leave the destination port (i.e., the landside transport time from the factory to the port in Asia, the Asian port wait, the ocean journey, and the North American port wait). The OTI is an average for loads from all Asian countries to all North American ports on any of the three coasts.

Flexport’s Asia-U.S. OTI reached an all-time high of 114 days last week. That’s 41 days or 57% higher than at the same time last year, and 63 days or 125% higher than at the same time in 2020, pre-COVID.

Chart: American Shipper based on data from Flexport

A shipment time is not included in the average until the import cargo leaves the U.S. port, meaning the indicator is retrospective. Goods included in the average in the first week of January might have left an Asian factory in early October, at a time when the queue of waiting ships off Los Angeles/Long Beach was around 40% smaller than it is now.

…click on the above link to read the rest of the article…

These New Numbers Are Telling Us That The Global Economic Slowdown Is Far More Advanced Than We Thought

January 15, 2019

These New Numbers Are Telling Us That The Global Economic Slowdown Is Far More Advanced Than We Thought

We continue to get more confirmation that the global economy is slowing down substantially. On Monday, it was China’s turn to surprise analysts, and the numbers that they just released are absolutely stunning. When Chinese imports and exports are both expanding, that is a clear sign that the global economy is running on all cylinders, but when both of them are contracting that is an indication that huge trouble is ahead. And the experts were certainly anticipating substantial increases in both categories in December, but instead there were huge declines. There is no possible way to spin these numbers to make them look good…

Data from China showed imports fell 7.6 percent year-on-year in December while analysts had predicted a 5-percent rise. Exports dropped 4.4 percent, confounding expectations for a 3-percent gain.

China now accounts for more total global trade than the United States does, and the fact that the numbers for the global economy’s number one trade hub are falling this dramatically is a major warning sign.

And of course it isn’t just China that is experiencing trouble. In fact, we just witnessed the worst industrial output numbers in Europe “in nearly three years”…

Adding to the gloom were weak industrial output numbers from the euro zone, which showed the largest fall in nearly three years.

Softening demand has been felt around the world, with sales of goods ranging from iPhones to automobiles slowing, prompting profit warnings from Apple among others.

If we were headed for a major global recession, these are exactly the types of news stories that we would expect to see.

…click on the above link to read the rest of the article…

China Won’t Be Taking Over

January 10, 2019

China Won’t Be Taking Over

Pablo Picasso Massacre in Korea 1951

In the New Year, after a close to the old one that was sort of terrible for our zombie markets, do prepare for a whole lot of stories about China (on top of Brexit and Yellow Vests and many more windmills fighting the Donald). And don’t count on too many positive ones that don’t originate in the country itself. Beijing will especially be full of feel-good tales about a month from now, around Chinese New Year 2019, which is February 5.

And we won’t get an easy and coherent true story, it’ll be bits and pieces stitched together. What will remain is that China did the same we did, just on steroids. It took us 100 years to build our manufacturing capacity, they did it in under 20 (and made ours obsolete). It took us 100 years to borrow enough to get a debt-to-GDP ratio of 300%, they did it in 10.

In the process they also accumulated 10 times more non-productive assets than us, idle factories, bridges to nowhere and empty cities, but they thought that would be alright, that demand would catch up with supply. And if you look at how much unproductive stuff we ourselves have gathered around us, who can blame them for thinking that? Perhaps their biggest mistake has been misreading our actual wealth situation; they didn’t see how poorly off we really are.

Xiang Songzuo, “a relatively obscure economics professor at Renmin University in Beijing”, expressed some dire warnings about the Chinese economy in a December 15 speech. He didn’t get much attention, not even in the West. Not overly surprising, since both Beijing and Wall Street have a vested interest in the continuing China growth story.

…click on the above link to read the rest of the article…

Trump’s Hand-Picked Winners and Losers: China vs Canada, NAFTA Threats, and P&G

September 22, 2018

Trump’s Hand-Picked Winners and Losers: China vs Canada, NAFTA Threats, and P&G

As a single country, China is the US’s largest trading partner but Canada is the largest export partner.

As Trump struggles to get a NAFTA deal going on account of Canada, the above chart puts things into perspective.

Canada is the US’s largest export partner. Moreover, when it comes to goods (as opposed to goods and services), the US consistently runs a trade surplus with Canada.

The US has had a goods surplus with Canada every month since 1985. Nonetheless, Trump is incredibly annoyed at Canada and threatens to put tariffs on Canadian cars.

Here’s the broad picture.

US Balance of Trade 2011-2017

I created the above chart from downloads of these three Census Department files.

Notes

Hong Kong, Singapore, and Taiwan were added in 2015.
The format of the reports changed in 2014, but that link has annual totals that date back to 2011.
Prior to 2014 there was no Exhibit 20 (selected countries).

2018 Subtotals

Mid-year 2018, the US is still running an overall trade surplus with Canada, so this will likely be the fourth year the US records a trade surplus with Canada (total the first two highlighted columns).

Nonetheless, Trump is moaning. And the global chart shows it’s over very insignificant totals.

This is the true nature of the “worst trade deal in history” where Canada is now more important than Mexico.

NAFTA negotiations are at an impasse.

As President Trump threatens to ink a deal with Mexico by Sept. 30 and leave Canada behind, the New York Times asks Can Nafta Be Saved? These Two Negotiators Are Trying.

…click on the above link to read the rest of the article…

“Trump Won’t Back Down”: Bannon Warns Trade-War Will Be “Unbearably Painful” For China

September 21, 2018

“Trump Won’t Back Down”: Bannon Warns Trade-War Will Be “Unbearably Painful” For China

Steve Bannon – who claims to have helped President Trump draft the battle plan for the ongoing trade war, says that Trump’s strategy is to make the conflict “unprecedentedly large” and “unbearably painful” for Beijing, according to an exclusive interview with the South China Morning Post.

The ultimate goal, says Bannon – is not just to force China to give up its “unfair trade practices,” but to “re-industrialize America” since manufacturing used to be the core of the nation’s power. Bannon also criticized the “Made in China 2025” plan for Beijing to catch up with the West in 10 key tech sectors – saying that Chinese firms were relying in generous government support to reduce future technological reliance on the West.

Bannon, who claimed to have helped Trump draw up the trade war plan, said that in the past, tariffs had been limited to imports of between roughly US$10 billion and US$30 billion but the sheer magnitude of the more than US$500 billion in question this time had “caught Beijing off guard”.

“It’s not just any tariff. It’s tariffs on a scale and depth that is previously inconceivable in US history,” Bannon said.

He said Beijing had relied on “round after round of talks” to take the momentum out of the US punitive measures, but the delaying tactics would not work.

“They always want to have a strategic dialogue to tap things along. They never envisioned that somebody would actually do this.” –SCMP

Bannon says he and Trump were convinced that the US would win a trade war, and that Chinese elites were worried about the same, with “so many senior Chinese officials exhausting all channels” in order to move their money out of China and snap up West Coast and New York real estate.

…click on the above link to read the rest of the article…

Currency Wars Erupt, We Have Reached the Point of No Return

April 7, 2018

Currency Wars Erupt, We Have Reached the Point of No Return

It is happening, and it cannot be stopped.

The Currency Wars that have been discussed at length by many precious metals experts for years are here, and there is now no turning back.

As I have previously discussed, these wars have been ongoing for much of the last decade, if not longer. However, it has remained largely a “gentleman’s” war, with neither side wishing to expose their hand too much.

Now, with the increased rhetoric coming from the Trump administration, things have turned red hot. Shots are being fired back and forth on an almost daily basis.

President Trump has imposed numerous tariffs on Chinese goods entering the United States. The first was $50 billion worth of tariffs, to which China swiftly responded in kind, imposing $50 billion worth of their own tariffs on American imports such as soybeans and small aircrafts.

As expected, President Trump would not let this stand, and he is now discussing an additional $100 billion worth of tariffs on Chinese goods. This action would, of course, be answered with a likewise response from China.

As we can already see, these actions will have a ripple effect through not only the Chinese and US economies, but the entirety of the West, as these countries are two of the largest importers / exporters in the world.

These increased hostilities show no sign of abating and are likely to increase from this point out. Neither side is willing to back down and show weakness. As a result, stock markets have corrected sharply, proving that they too prescribe to my assumption.

…click on the above link to read the rest of the article…

Trading away our future?

January 22, 2018

Trading away our future?

Early trade was about ecological adaptation, transporting essential food or other essential goods to a places where they were lacking. Very little in present international trade is based on that. Instead, trade in itself creates shortages. Today, Sweden only produces half the beef it consumes. This is not because there is no land or resources available in Sweden. On the contrary, the country has let a million hectares of meadows revert to forest and a lot of arable land is idle – or grazed by horses that people keep for a hobby. International trade can be a safety valve for food shocks by moving food from one part of the world to the other. Yet it has dramatically reduced each region’s self-sufficiency and made all of us dependent on global supply chains for our daily food. Some of the trade is really difficult to understand or justify. More or less identical products are exported and imported by the same countries. As the ecological economist Herman Daly points out: “Americans import Danish sugar cookies and Danes imports American sugar cookies. Exchanging recipes would surely be more efficient”.[1]

It is a mistake to conclude that there is a linear process driving farmers into increased levels of commercialization. In times of collapsing markets, natural disasters, unrest or war, self-sufficiency and non-market exchange is bound to play a bigger role. The Roman peri-urban sprawl with agricultural estates, villas, engaged in intensive commercial production went the same way as the Empire. At the fall of Rome the area fell into neglect and finally reverted to extensive pastoralism.[2] The pastoral beauty of this Roman Campagna inspired the painters who flocked into Rome in the 18^th and 19^th centuries, when it was the most painted landscape in Europe.[3]

…click on the above link to read the rest of the article…

Are You Kidding Me? Chinese Exports Plunge 25.4 Percent Compared To Last Year

March 9, 2016

Are You Kidding Me? Chinese Exports Plunge 25.4 Percent Compared To Last Year

We just got more evidence that global trade is absolutely imploding. Chinese exports dropped 25.4 percent during the month of February compared to a year ago, and Chinese imports fell 13.8 percent compared to a year ago. For Chinese exports, that was the worst decline that we have seen since 2009, and Chinese imports have now fallen for 16 months in a row on a year over year basis. The last time we saw numbers like this, we were in the depths of the worst economic downturn since the Great Depression of the 1930s. China accounts for more global trade than any other nation (including the United States), and so this is a major red flag. Anyone that is saying that the global economy is in “good shape” is clearly not paying attention.

If someone would have told me a year ago that Chinese exports would be 25 percent lower next February, I would not have believed it. This is not just a slowdown – this is a historic implosion. The following comes from Zero Hedge…

Things are not getting better in China as Exports crashed 25.4% YoY (the 3rd largest drop in history), almost double the 14.5% expectation and Imports tumbled 13.8%, the 16th month of YoY decline – the longest ever.Altogether this sent the trade surplus down to $32.6bn (missing expectations of $51bn) to 11-month lows.

So much for that whole “devalue yourself to export growth” idea…

I don’t know how anyone can possibly dismiss the importance of these numbers. As you can see, this is not just a one month aberration. Chinese trade numbers have been declining for months, and that decline appears to be accelerating.

…click on the above link to read the rest of the article…

I’m in Awe at Just How Fast Global Trade is Unraveling

February 16, 2016

I’m in Awe at Just How Fast Global Trade is Unraveling

It simply doesn’t let up. Global trade is skidding south at a breath-taking speed.

China produced a doozie:

The General Administration of Customs reported on Monday that in yuan terms, exports dropped 6.6% in January from a year ago while imports plunged 14.4%. In dollar terms, it was even worse due to the depreciation of the yuan since August: exports plunged 11.2% and imports 18.8%, far worse than economists had expected.

And so the trade surplus, powered by those plunging imports, jumped 12.2% to a record $63.3 billion.

This came on top of China’s deteriorating trade numbers last year, when exports had fallen 1.8% in yuan terms while imports had plunged 13.2%. Imports have now declined for 15 months in a row. That’s tough for the world economy.

OK, Chinese trade data can be heavily distorted by fake invoicing of “imports” from Hong Kong, a practice used to maneuver around capital controls and send money out of China. Imports from Hong Kong in January soared 108% from a year ago, even as shipments from other major trading partners declined. Bloomberg:

China has acknowledged a problem with fake invoicing in the past. In 2013, the government said export and import figures were overstated due to the phony trade to bring money into the mainland. Trade data for December suggested the practice had flared up again, this time to get money out.

In January, we have the additional fudge factor of the Lunar New Year. Chinese companies were closed all last week. It caused all kinds of front-loading in December and early January followed by a wind-down in late January and early February.

Oh, and India:

On Monday, the Ministry of Commerce and Industry in Asia’s third largest economy reported that exports of goods plunged 13.6% in January year-over-year, the 14th month in a row of declines.

…click on the above link to read the rest of the article…

Canada Rebels against the Destruction of the Loonie

January 19, 2016

Canada Rebels against the Destruction of the Loonie

The fear of “currency instability.”

“Without precedent” — that’s what National Bank of Canada’s chief economist Stéfane Marion called the wholesale destruction of the loonie.

The Canadian dollar is in a tailspin. Rarely has it tumbled so far so fast, and against so many currencies. The steepness of the CAD’s depreciation against the USD is without precedent, -33%, or 3.5 standard deviations, in 24 months.

In the two weeks so far this year, the loonie has dropped 5.8% against the euro, 5.3% against the greenback, and 8.6% against the yen. “Even the likes of Norway (+5.4% against the CAD) and Sweden (+3.9%) are mocking the once-mighty Canadian dollar,” Marion wrote in the note. “Australia and New Zealand? Not to worry, they are also gaining ground against the CAD.”

The Canadian dollar plunged to a fresh 13-year low last week and hasn’t recovered since, hovering at US$0.688, below $0.70 for the first time since spring 2003.

People are getting alarmed. A lot of consumer goods are imported, including 81% of fruits and vegetables. The plunging loonie makes them more expensive for Canadians: meat prices rose 5% last year, fruits 9%, vegetables 10%. The average household ended up spending C$325 more for food in 2015 than in 2014, according to the Food Price Report. And it’s likely to get worse.

When Stephen Poloz became governor of the Bank of Canada in 2013, he set out to hammer down the Canadian dollar. In 2015, he redoubled his efforts. He relied on ceaseless jawboning. He even invoked the absurdity of negative interest rates. And he cut the overnight rate twice, the infamous surprise cut in January and the telegraphed cut in July, at a time when the Fed was flip-flopping about raising rates.

…click on the above link to read the rest of the article…

Canadians Are Panicking Over Food Costs After Currency Collapse

January 15, 2016

Canadians Are Panicking Over Food Costs After Currency Collapse

It’s no secret that America has a serious inflation problem. Though the Federal Reserve insists that our inflation rate is only at around .5%, we’ve all seen the price of food, rent, healthcare, and energy skyrocket over the past 10-20 years. However, this has been a gradual shift. Canada on the other hand, has just seen the price of every day goods rise precipitously over a very short period of time.

The crash in oil prices has crippled their economic growth, and led to the decline of the Canadian dollar, as well as a predictable increase in the cost of imports like food. For those of us living in the US, this provides a really good example of what life may be like should the dollar take a plunge in the near future. Here’s what our northern neighbors have been dealing with:

It is often said that a free-floating currency acts as a shock absorber.

But when Canadians go shopping for groceries these days, they’re getting nothing but the shock—sticker shock, that is.

On Tuesday, the Canadian dollar, commonly known as the loonie, broke below 70 U.S. cents for the first time since May 1, 2003.

For America’s northern neighbor, which imports about 80 percent of the fresh fruits and vegetables its citizens consume, this entails a sharp rise in prices for these goods. With lower-income households tending to spend a larger portion of income on food, this side effect of a soft currency brings them the most acute stress.

James Price, director of Capital Markets Products at Richardson GMP, recently joked during an interview on BloombergTV Canada that “we’re going to be paying a buck a banana pretty soon.”

Canadians took to twitter this week to share their collective horror over the rising cost of food. Cucumbers are $3 each. A head of cauliflower is $8.

…click on the above link to read the rest of the article…

Baltic Dry Crashes To New Record Low As China “Demand Is Collapsing”

December 16, 2015

Baltic Dry Crashes To New Record Low As China “Demand Is Collapsing”

Worst. Ever.

As Bloomberg adds, China, which makes about half the world’s steel, is on track for the biggest drop in output for more than two decades, according to data compiled by Bloomberg Intelligence…

Owners are reeling as China’s combined seaborne imports of iron ore and coal — commodities that helped fuel a manufacturing boom — record the first annual declines in at least a decade. While demand next year may be a little better, slower-than-anticipated growth in 2015 has led to almost perpetual disappointment for rates, after analysts’ predictions at the end of 2014 for a rebound proved wrong.

“It doesn’t help that Chinese steel production is about to see the most dramatic decline to the lowest in 20 years,” said Herman Hildan, a shipping-equity analyst at Clarksons Platou Securities in Oslo. “Demand growth is collapsing.”

* * *

Sounds like a perfect time to hike rates and exaggerate the deflationary tsunami and monetary outflows from the world’s potentially growing economies.

Despite a brief dead-cat-bounce late November, which Jim Cramer heralded as evidence of stabilization in China, the world’s best known freight index has collapsed to new all-time record lows this morning. Amid a persistent glut of ships and ongoing concerns about Chinese steel imports, The Baltic Dry has tumbled to 471 – the lowest level in at least 30 years.

We Have Never Seen Global Trade Collapse This Dramatically Outside Of A Major Recession

November 10, 2015

We Have Never Seen Global Trade Collapse This Dramatically Outside Of A Major Recession

If you have been watching for the next major global economic downturn, you can now stop waiting, because it has officially arrived. Never before in history has global trade collapsed this dramatically outside of a major worldwide recession. And this makes perfect sense – when global economic activity is increasing there is more demand for goods and services around the world, and when global economic activity is decreasing there is less demand for goods and services around the world. So far this year, global trade is down about 8.4 percent, and over the past 30 days the Baltic Dry Index has been absolutely plummeting. A month ago it was sitting at a reading of 809, but now it has fallen all the way to 628. However, it is when you look at the trade numbers for specific countries that the numbers become particularly startling.

Just within the last few days, new trade numbers have come out of China. China accounts for approximately one-fifth of all global factory exports, and for many years Chinese export growth has helped fuel the overall global economy.

But now Chinese exports are falling. In October, Chinese exports were down 6.9 percent compared to a year ago. That follows a decline of 3.7 percent in September.

The numbers for Chinese imports are even worse. Chinese imports in October were down 18.8 percent compared to a year ago after falling 20.4 percent in September. China’s growing middle class was supposed to help lead a global economic recovery, but that simply is not happening.

The following chart from Zero Hedge shows just how dramatic these latest numbers are compared to what we are accustomed to witnessing. As you can see, the only time Chinese trade numbers have been this bad for this long was during the major global recession of 2008 and 2009…

…click on the above link to read the rest of the article…

China’s Economy Even Worse than Suspected?

October 31, 2015

China’s Economy Even Worse than Suspected?

It’s always good to have a plan. So China has a new five-year plan, its 13th. And the plan is to dial down China’s formerly white-hot economy to a target of “medium-high economic growth” for the five years starting in 2016.

“The country will promote greater sophistication in its industrial sector and significantly raise the contribution of consumption to economic growth,” according to the Global Times, a tabloid under the People’s Daily, which is the official propaganda organ of the Communist Party. The goal is to double 2010 GDP and per-capita income by 2020 and create “a moderately prosperous society.”

That’s all exciting stuff for the future. Meanwhile, there’s today.

And today, the Chinese economy isn’t exactly hopping, despite the official GDP growth rate of 6.9% that no one believes, especially not the Chinese leadership. So the People’s Bank of China cut its benchmark interest rates a week ago – the sixth cut since November – to the lowest level in the data going back two decades.

The leadership is trying to reform and restructure the economy away from low-value cheap-labor manufacturing to the miraculous powers of consumerism, implemented decades ago with such glorious success in the US and elsewhere. So exports and imports have been plunging. But no big deal because retail and services are going to make up for it. Other problems are cropping up….

“China’s steel demand evaporated at unprecedented speed as the nation’s economic growth slowed,” Zhu Jimin, deputy head of the China Iron & Steel Association, explained on Wednesday, according to Bloomberg. Demand for steel, which is used in everything from buildings to cars, has dropped by 8.7% in September from a year ago. Prices have crashed. And steel mills are buckling under their debts even as they’re producing tons of red ink in an ocean of overcapacity.

…click on the above link to read the rest of the article…

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