i understand one of the big problems in the la ports is that empty containers are piling up and blocking the flow of traffic. trucks have a hard time getting in, moving around, and getting out because empty containers are not being moved out of the yards. one of the many problems, from what i understand. odd they have not been able to work through this issue. it seems solvable.
Don’t “start me up” about what I tjhink about how truckers are treated in the industry. I’ll “blow a gasket” and you’ll never get me off the topic.
THey can’t stand anyone who takes up a baesball bat for the working man, and goes to work on thejm
The problem is that it is cost effective for empty ships to sail off from LA to China without a load of empty containers, rather than wait for empty containers to be loaded and then bring them back to China. That will either be solved slowly by market forces (when empty containers become valuable enough in China to make it worth waiting in LA and bring them back to China) – or if China/US will place a price on the “one-way-ships”. A 5 day waiting period for loading/unloading ships that didn’t bring back empties would fix it.
first order solution would be to see who is responsible for the empty containers sitting in the yards, and charge them appropriate storage fees. my guess is we would get it cleaned up pretty quick. as it is, seems as though there is no holding cost for empty containers in the port, or at least one that is enforced. that is a flaw in operations and management.
That would just transfer the inefficiencies to another place. If those trucks dropping off empties to pick up full containers were to not bring back empties, those empties would just pile up somewhere else (shoulders of highways, rest areas, the woods, ?). Just like with the ships and harbors, the abandoned empties will eventually have to be transported back to China no matter what happens. The problem needs to be solved not just pushed down the chain.
December 13, 2021
Why is there a global supply chain crisis?
By Djoomart Otorbaev
Despite forecasts of a rapid recovery in the global economy this year, it still faces several severe and unexpected challenges. No one anticipated that there would be a shortage of semiconductors or containers, an energy crisis and a record rise in natural gas prices, and now also significant problems in the global supply chain. Analysts warn that problems with global logistics and distribution will continue until 2023.
For a long time, logistics has evolved following lean production principles, first developed at Toyota and based on the maximum cost reduction. It reduces warehouses and parts storage times, minimizing labor and machinery to the level required to maintain stable and predictable production. But the lean manufacturing principles work well only during the steady economic growth phase.
The current crisis has revealed several trends that no one could have predicted. Initially, the spread of the pandemic led to a sharp halt in the world’s economic activity. Besides, consumer demand fell sharply. This year, most countries returned to rapid economic growth.
The first signs of destabilization of supply chains appeared in the second half of last year. First, it seemed to be a temporary phenomenon, but the problem did not go away and, on the contrary, worsened. As a result, it expanded to a global scale. One of the most apparent aspects of the logistics crisis is the rising cost of transportation. According to Drewry Shipping Consultants, the average cost of sea transportation of a standard 40-foot container (FEU) is currently about $10,000. At the same time, over the past five years before the pandemic outbreak, it ranged from $1,000 to $2,000. One must remember that more than 90 percent of world trade is currently accounted for by sea transport.
As expected, the most significant increase in the cost of transporting happened on the most intensive routes from China to the U.S. and Europe. The cost of transporting FEU Shanghai – New York, which was about $2,500 in 2019, had grown to $15,000 by September. On an even busier route – from China to the U.S.’ West coast – the cost of transporting a similar container reached $20,000. On the Shanghai – Rotterdam route, the cost of transporting one FEU container now costs about $14,000.
On the other hand, even with such high prices, the delivery times of goods have significantly increased….
Djoomart Otorbaev is the former Prime Minister of the Kyrgyz Republic, a distinguished professor of the Belt and Road School of Beijing Normal University.
I take issue with “a record rise in natural gas prices”. Natural gas prices were higher in 2000, 2005 and 2008. In all three of those years, natural gas prices were over $10 and in 2005 they topped out at over $14. This year, natural gas topped out around $6 and is currently trading below $4.
King John’s return:
Yes, you are right natural gas prices have been higher in the USA. Europe and elsewhere are setting records.
“For a long time, logistics has evolved following lean production principles, first developed at Toyota and based on the maximum cost reduction. It reduces warehouses and parts storage times, minimizing labor and machinery to the level required to maintain stable and predictable production. But the lean manufacturing principles work well only during the steady economic growth phase.”
Part of Toyota’s lean production model was just in time inventory, which of course has turned out to be a complete disaster given current conditions. Never mind the fact that Bruce “no relationship to Robert” Hall has been telling us just in time inventory is the only logical approach.
January 15, 2018
Price of Natural Gas, 2017-2021
(Indexed to 2017)
Henry Hub Natural Gas Spot Price, $ per Million BTU, Monthly
1/1/1997 – 11/1/2021
Despite forecasts of a rapid recovery in the global economy this year, it still faces several severe and unexpected challenges. No one anticipated that there would be a shortage of semiconductors or containers, an energy crisis and a record rise in natural gas prices, and now also significant problems in the global supply chain. Analysts warn that problems with global logistics and distribution will continue until 2023….
[ While the word “record” is incorrect, if prices before 2015 are looked to, nonetheless the quick rise in natural gas prices were a significant shock. I do not think the analysis affected by the use of “record.” ]
Has capitalism sold us a system that fails to allocate vast surplus efficiently?
Is an inflation-proofed basic income the best moral way to give me a refund on that social contract?
YOU’re really the poster boy for talking shit about MArxists, etc. YOU’re working at it at FOX studios…….??? Goddamn you make me sick man. I’m so goddamned sick of people like you “:representing ” a group, but you can never read a goddamned newspaper.
At long, long last…
2) Entirely likely.
MY REAL last name is VERY German, I don’t THINK this is inflation (in some systemic way. DOes that mean anything??? Probably not
The Oyu Tolgoi mine in Mongolia produces a large amount of copper and gold. Most of its shares are owned by Rio Tinto who is known for its transfer pricing manipulation. We get the news that Rio Tinto has decided to retire the mine’s $2.3 billion in debt which takes off the table an intercompany interest expense debate:
Before we all applaud Rio Tinto for being corporate good guys, maybe more disclosure should be made with respect to how the copper and gold from this mine is priced by its Singapore marketing affiliate. After all – the big transfer pricing play has been for the Singapore marketing affiliate receive those high market prices for copper and gold but pay the mine an intercompany price that includes a huge discount for Singapore.
We might expect a massive stimulus coupled with a major loss of jobs to lead to an explosion of the trade deficit, which it has.
In extremis, such a stimulus might even generate record levels of goods imports, which it has.
This record level of imports would result in record levels of shipping, which it has, with LA in-bound port traffic running about 15% above its prior peak. (Let me add here that US shale oil production has meant that the historical US trade deficit in oil has disappeared. Since oil is imported chiefly through Houston and a couple of other ports — but not LA — the increase in port traffic is showing up in merchandise, not oil, imports. That is, imports are going to cargo ports like Long Beach and LA.) Such ports may not be equipped to handle surges of cargo imports well above historical peaks.
At the same time, a loss of jobs accompanied by record stimulus might lead to weak exports, which it has.
Taken together, record merchandise imports and weak exports could easily led to bottlenecks at ports, which it has, as the graph above shows. These bottlenecks can in turn create further bottlenecks in the supply chain, because intermediate goods are also trapped in the ports. Thus, the port backups and supply bottlenecks can in significant part be attributed to the Biden stimulus, which I will remind you Larry Summers said was too large. It clearly was.
Finally, the stimulus has supported consumption in the US, but paradoxically, it has provided a stimulus to production in China, among others. In other words, US borrowing and spending is supporting China’s manufacturing economy. This again suggests yet another downside risk to China’s economy as the stimulus fades and the Fed raises interest rates.
Bill McBride’s discussion is something we should all read but PLEASE:
“We might expect a massive stimulus coupled with a major loss of jobs to lead to an explosion of the trade deficit”
He did not write this utter gibberish. You did. Stop insulting Bill without your Fox and Friends spin on his discussion.
Gee Steve – you link to Bill’s tweet but I guess you forgot to read the header:
‘Trade Deficit Decreased to $67.1 Billion in October’
His graphs were clear. Imports and exports both fell during the lock down phase of this pandemic but recently they have both increased. And exports of late have been increasing faster than imports.
So of the opposite of the gibberish you wrote. Pardon me – but are you the dumbest consultant ever or what?
“Finally, the stimulus has supported consumption in the US, but paradoxically, it has provided a stimulus to production in China, among others. In other words, US borrowing and spending is supporting China’s manufacturing economy.”
Let’s check with the Census trade data:
Back in October 2018 (before that stupid Trump trade war kicked in), we imported $52 billion from China. Last month we imported only $48 billion from China.
Listen folks – it is clear that Princeton Steve tells lies. No one can be THAT stupid after all.
You left out the part about the extraordinary brevity of the recession and the extraordinary rapidity of job gains which is partly the result of targeted fiscal expansion.
You also left out the historic pattern of the U.S. trade deficit expanding during expansions and contracting during contractions – something to do with relative marginal propensity to import. (Pardon my language.)
If you don’t want the trade deficit to expand, then you are kinda rooting for recession, whether you know it or not. (Now there’s a question.)
When you cherry-pick a couple of fact(iod)s and ignore everything else, why should anyone listen?
He left out three other things:
(1) Exports have been rising
(2) McBride recently noted how the trade deficit has been falling
(3) China’s exports to the US were LESS than they were in late 2018
Princeton Steve has to lie like this as he wants another invite on Fox and Friends.
You’re confusing a recession with a suppression, Duckie. And a depression, for that matter. That’s why the Fed could take the Fed funds rate to zero after the Great Recession, and housing values did absolutely nothing. By contrast, taking the FFR to zero during the suppression, the pandemic, caused housing values to explode. You’re conflating different types of downturns.
As for the trade deficit, it contracted in both the ’01 and ’08 downturns. It absolutely exploded this time around, especially given that we have no deficit in oil imports. See the graph.
I am not cherry-picking factoids. I am walking you through how a stimulus could lead to a backlog at the ports. The key graph is the one below. It shows in-bound LA port traffic about 15% above the previous peak. Did they have 15% spare capacity in the system? I am guessing they did not. If, in fact, imports had fallen, then you’re line of reasoning would be more compelling. As it is, imports just blew through the roof. Now maybe that’s a desirable state of affairs. But the casual linkage looks about right: the stimulus sucked in vast quantities of imports, some of which got stuck in overloaded ports.
“I am not cherry-picking factoids.”
Yes you are. And you added even more word salad gibberish to your original really stupid comment. What a waste.
“That’s why the Fed could take the Fed funds rate to zero after the Great Recession, and housing values did absolutely nothing. By contrast, taking the FFR to zero during the suppression, the pandemic, caused housing values to explode. ”
This from the troll who kept telling us housing prices were about to collapse. Do you work for IHOP as you flip flop with true expertise?
“As for the trade deficit, it contracted in both the ’01 and ’08 downturns. It absolutely exploded this time around”
Those two recessions had greater duration than the past one. Earth to the lying consultant from Princeton: (a) the economy is growing now; (b) exports are also rebounding. Either you are the dumbest troll EVER or you are blatantly lying here.
Ports are pretty big capital assets, with significant time/investment required to justify expansions. For any industry with those dynamics (e.g. steel), it is not unusual to have occasional “shortages”. It’s just that you can’t expect it to turn on a dime OR to perfectly anticipate every future need (or even lack of need). That’s normal, not a market failure. Just that markets for long term are different than immediate.
The other thing that substantially affects ports is they are very highly regulated, even just by need (not saying it in an anti regulation sense). I mean you need imminent domain for many decisions on expansions or the like. But any way you cut it, these facilities are quasi governmental (and very rich, lot of money in the port organizations).
In Cali, the restrictions on stacking empty containers are having an impact. I hear shippers would like to be able to go 5-high instead of 2-high, to reduce some of the log jam. I don’t know enough about safety, appearance, or whatever other reasons for those restrictions exist. So, not advocating it. It’s just something I’ve heard requested.
We seem overdue for a Hamilton review of production by state. I know this was of huge interest to him in the past, with many blog posts and article from 2010ish to 2014ish. For example:
The basic thesis was that oil production had grown in the US (to 1970) via movement to new regions. Also that, in general, once an area peaks, it will not repeak. I never really agreed with the fascination on date of peaking (to me a 3 year period of half MM bopd is more significant than a year of one MM bopd, but whatever.)
However since these articles, we’ve had the following states, areas with recent peaks:
1. ND (to his credit, noted).
2. USA overall. Pretty darned significant. We didn’t get any new states after all or really even find new strata (Bakken and Permian known since the 50s).
3. TX. Largest overall. And went from 3.5ish peak to 5ish peak. Ginormous and world scale.
4. GOM (I would separate it from LA, think you ignore a phenomenon to mix it…and it was supposed to be dead per the peak oilers, but actually topped 2 MM bopd for a few months.)
5. NM. Hitting a million plus is world scale.
6. CO. Noted by him in later articles, but an example of the narrative changing even over time period.
7. OH…and WV, both very traditional App producers, and even the “overall App”, breaking historic peak. (But not PA on its own.)
Wouldn’t even purely for “eating crow” (but a little wouldn’t hurt). But even just for noticing interesting things happening. For being interested in the story which ever way it turns. Maybe even for evaluating some previously held Bayesian priors (and no sudden shift needed, I can agree with time needed to change priors).
Of course none of this is to say oil is not a fossil fuel. Nor that depletion doesn’t matter in supply demand. But that looking long term, one needs a little more openness on future possibilities. It’s not like there hasn’t been a long, long history of resource growth.
And it’s not like a lot of commenters didn’t tell Hamilton that the USA had one more turn of the worm left. And that’s even without drilling ANWR or VACAPES (both still physically lurking).
Gorsuch’s dissent on the vaccine mandate issue made a claim that if one’s religious beliefs are pro-choice this is a Constitutional reason not to be subject to these mandates because Gorsuch thinks fetal cell research is somehow a baby killing plot – or something weird like that:
First of all his bizarre reasoning would apply to an incredible amounts of treatments and vaccines. Second of all – his reasoning was rejected by the Catholic church. How did someone like this get on our Supreme Court?
Nattelie “I paid for that yeh know”
Carson “Did heh??”
A hard joke among riends
January 30, 2018
Producer Commodities Price Index, 2017-2021
January 30, 2020
Producer Commodities Price Index, 2020-2021
(Indexed to 2020)
Saudi rig count over time:
Peakoilbarrel blogger making much of the recent low count, that it implies resource exhaustion for Saudis (a moth-flame topic for the conspiracy fringe of peak oilers). But even if you figure they have 40 years instead of 80, then why would that affect rigs now. I mean you have to be really wacky to th that mattink in tems of immediate limits to development in SA.
For that matter, he shows a graph starting at 2017, ignoring the big dip in 2011. Or the low rig counts in 1990s.
It’s also interesting to juxtapose with James’s brief comments on Saudi issues (given the growth in rigs, 2010s versus 1990s).
But for both, you really need to consider the massive rig productivity (even if lower than 1990s, still massive). And then also, you’re dealing with a known market manipulator, government controlled (thus occasionally cash versus NPV focused) as well as the intrinsic long term contracts (2-3 years) involved in Arabian versus US production, causing lags and the like.
I have no problem with anonymity, but any number of people could show up here as “Anonymous “. Just so we know who we are reading, could you call yourself “Anonymous 1” or something?
You’ve gone off topic, which many of us do. However, your writing suggests to me that you are in the middle of a conversation which the rest of us aren’t party to. I’m pretty sure you think “peak oil” is problematic, but “peak oil” means different things to different people. And so on.
So I guess what I’m saying is, what’s your point? I can only speak for myself, but I don’t like to enter a conversation if I don’t know what it’s about.
Context for my comment: we are overrun by ill-informed gas-bags in comments here. It would be cool to round up more informed, no-chip-on-the-shoulder commenters, but I want to understand the point of what I’m reading.
Under another thread – JohnH decided to attack me as being a lackey of some alleged shipping cartel. Yea I know – this intellectual garbage is what he do. Of course he did find some discussion of a bipartisan bill to address this alleged cartel. This from a troll who tells us Congress is bought and paid for by oligopolists. Go figure. Of course our economic know nothing does not realize there is a very long history of economists debating this issue. This discussion is quite good and includes a discussion of the role of the containership revolution. I would ask JohnH to check these discussions out even if he is convinced such discussions cannot exists because we economists are either incredibly stupid or bought and paid for by evil rich people:
Hilarious! Simply hilarious! This time pgl defends the shipping cartel by citing a piece that appears have been written 20 years ago. It makes one mention of the Ocean Shipping Reform Act of 1998 and no discussion of the tremendous concentration of the industry since.
Nice try pgl, but no points. As I said in the other post, even Republicans get what pgl refuses to understand…typical blather of the faux progressive liberal that pgl claims to be.
“This time pgl defends the shipping cartel by citing a piece that appears have been written 20 years ago.”
I never defended any cartel so you little lying here is very pathetic. Yes – I provided a summary of the issue over the centuries. You have provided your usual – NOTHING.
Now run along little lying turd and READ the damn literature. You might notice that some of the issues your link hinted at have been thoroughly discussed in the past. Then again – you are too damn stooopid to know what these terms even mean so maybe you are smart to read up on an economic issue that you could never understand.
The White House gets it. “ The cartel of shipping companies that control the terms of global trade have never been more profitable,” the White House said. “In the third quarter alone, they made $48 billion, which is nine times more than they made the year before.”
The message serves as the administration’s latest push to link rising prices to corporations.”
But pgl , instead of acknowledging the highly concentration of the shipping industry and its price gouging, tries. to defend it by directing our attention to a quaint report that talks about the history of the shipping industry before the Ocean Shipping Reform Act of 1998, the Clinton deregulation that enabled the industry to become highly concentrated and engage in price gouging in the first place. Lame try, pgl!
Also it’s interesting that the White House is linking rising prices (inflation) to corporations. Somehow it seems inconceivable to the alleged economists here that corporations could contribute to inflation. Are we supposed to believe that corporations are not the entities that set the prices we pay? Or are we to assume that ubiquitous monopolies and oligopolies don’t use their pricing power to boost prices and profit margins?
I guess the real question about the White House’s message is: Did Jared Bernstein jump ship?
Well yea – profits in a boom are higher than the depressed profits a few years back. What part of profits are volatile do you not understand. I providing the Annual Reports for the world’s largest publicly traded shipping company. I guess you are too incompetent to check out their financials over time.
“While the administration didn’t single out specific companies, some of the most prominent names in the industry include Maersk, COSCO, and Evergreen. Broadly, the shipping sector saw profits hit a record $48.1 billion in the third quarter of 2021.”
Hey the story notes Maersk (which I provided a link to their financials) and two other major players. Be a good little boy and calculate their return on assets for the last 10 years. Oh wait – you do not know how to read an Annual Report – do you? Babble on little incompetent boy!
Will wonders never cease? A Democratic partisan hack criticizing Biden for noticing price gouging? I guess pgl considers that defending cartels trumps defending Democrats.
December 15, 2021 at 12:40 pm
I should stop criticizing jerks like Econned and the rest of these right wing trolls as your pathetic and dishonest name calling is off the charts. I guess since you flunked Econ 101 you are incapable of having an adult conversation. DAMN!
There is a LOT of great economics in my 20 year link. Let’s take just one paragraph:
“Shipping conferences have been embroiled in a long-running controversy about their ultimate effects on social welfare. On the one hand, there is a school of thought that the cartel behavior is clearly detrimental, because through their participation in cartels firms are able to charge higher rates than would otherwise be obtained. On the other hand, the conferences themselves defend their practices as necessary for the very existence of the liner industry and undeniable benefits that regularly scheduled service brings for businesses and passengers. They argue that competition in liner shipping is unsustainable and destructive, and that the conferences are an efficient solution to an otherwise intractable market problem. If competition were to reign, the conferences argue that rates would immediately fall to un-remunerative depths and firms would all be driven to bankruptcy, or that only a monopoly would remain, which would be far worse than the cartel system. The destructive competition argument has recently been advocated by economic theorists using the economic concept of the core, which is the set of competitive equilibria. These theorists argue the core of the liner shipping market is empty – that is, there does not exist a competitive equilibrium and that conferences represent an efficient response to the problem. The controversy remains unresolved.”
Of course NONE of this will JohnH ever even remotely understand. Economics has never been his forte.
If the shipping industry is a natural monopoly, it could be managed as a regulated public utility…something the American Prospect article notes…and pgl didn’t notice. Pgl’s article gives us a false choice between a rapacious cartel and destructive, free market free for all.
You do know that the shipping sector is international not domestic. Or maybe you do not know as you really are dumb. Now if the UN wants to step in and regulate – fine by me. Somehow, however, I do not see that happening.
That American Prospect discussion did talk about regulation but it never advocated letting this sector be reduced to a single firm. Did you make this up or what? Come on dude – trying READING the literature. I would suggest you might LEARN something but my long experience talking to the dead tree that calls himself JohnH suggests otherwise.
shipping is international. how exactly would you make that a regulated public utility? even if you did, do you really think it would lower cost and improve efficiency? lets work through your solution here, step by step. no magic or hand waving permitted.
baffling—you really think that a price gouging international cartel is the solution? Wow!
Maybe instead of focusing on ever more corporate friendly “free” trade agreements, the major economies should get together to regulate some of the industries that abuse their market power.
Oh, no!!! An end to the laissez faire policies of the past forty years! What protectionist heresy!
December 15, 2021 at 2:34 pm
baffling—you really think that a price gouging international cartel is the solution? Wow!
He never said that. You are beyond disgusting.
“the major economies should get together to regulate some of the industries that abuse their market power.”
again, lets take this step by step and go through the process. tell me your plan on how we will develop this regulated public utility which improves efficiency and decreases cost. in particular, how much more efficient, and how much cheaper, will this regulated public utility be?
i am giving you a public platform in which to convince me of your solution. i never argued for a private cartel. i simply questioned whether you had a solution not based upon magic.
i think we over look one part (and there are lots of parts to the global supply chain crash. some over look that last year was almost a depression (20 million lots jobs among other things ) that lead to large drop in demand for some products (vehicles for example which also reduced production of same. also made used vehicles prices to skyrocket, to the point that used vehicles cost almost as much as new ones, and only a few didnt go down, like those used in home offices), which lead to many suppliers to switch to other offerings. also prices almost stopped going up. so, when some sort of recovery from COVID happened (which caused almost all of this which may only be temporary…the virus keeps mutating). with that recovery, you had demand for products that werent in demand last year, that all of sudden needed parts that they had stopped ordering last year, but because the vendors went on to other products to sell, now they cant supply their needs, or they need to rework their plants (since some were closed), and if they were switched to different products, there is a need for either upgraded plants, or new ones. some of this is exasperated by JIT (aka just in time) manufacturing, where the barest number of parts are kept on hand, but, Toyota who some emulated, found out that not all parts are equal, in that some cant be put back into production so quickly, while others (ex. plastic parts vs chips), so they started looking their parts, and those would take a while to get back into production, they keep a much larger supply on hand. and there is the labor shortage, many of those who got layoffed last year, just retired, well it seems trucking is one that this happened too, and since its not a popular profession (seems their employers dont exactly treat them well…and job requires being away from home a lot, up to weeks at a time….so they see no reason to go back…plus many may also gone to new jobs, driving local deliveries instead. since demand recovered from a stout fall last year, and for what ever reason, we only look back one year, inflation appears to be really bad (go back further…it doesnt look nearly so bad). also turns out most of the ports reduced their hours (because last year reduced demand for them too), leading to a 5 day week, and not 24 hours either, plus layoffs of workers too (see truckers,,,same problems show up here, they are struggling to hire/rehire now). so you end up with low supply with high demand, isnt that what we have always been told, would cause high inflation. some of these issues are loosening….up…for now. but for how long is any ones guess. plus how do we recreate a US chip building ? plants take a very long time to build (some thing about requiring a clean room)
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