> The rates for both trade lanes are hovering around 2019 levels, but fuel and labor expenses are higher now than before the pandemic.
Hard to really feel like this is a crisis, since all of the reporting is how there was a brief, glorious period (for the companies) of 10x prices, and the crisis is that the period is ended.
Definitely feels like there should be a "law of headlines" coined to effect of - something must always either be surging catastrophically or plummeting disatrously.
The truth is, journalism has cratered. However, most are not ready to accept the truth, since they still believe the media are an essential part of democracy.
And that’s an inclusive “or”, mind you-- I remember an Al-Jazeera news story that opened with the line “Some say the new measures go too far… but do the new measures go far enough?”
The law of headlines should also mention that they mention events in the future: “Today, we expect the president to meet with xyz and announce what they will do with abc”, building up the thrill, rather than reporting when it’s done and the announcement is made.
Journalists talking about the future. That’s not journalism.
How is no one talking about the sanctions war? Either here or in the article. Part of the sanctions war has made it extremely hard for insurers to know whether or not they are violating sanctions by insuring vessels. Navigating the current legal landscape is a nightmare for shipping companies, which leads a lot of companies to not not accept cargo if they can't be certain about the legal situation.
Im not sure I follow… rates are the same as 4 years ago but operating costs are significantly higher. That seems genuinely difficult - if their rates dont keep up with inflation then its not a sustainable trend.
What were their rates 5, 6, and 7 years ago? what was their inflation adjust costs and profits over a decade? Did they just pluck out one year of data and say "that's what the profits we want to be making" if that year was a particularly prosperous year.
"fuel and labor expenses are higher now than before the pandemic.
“Spot rates are at a level that in the long run are not sustainable, with costs up by 25% to 30% since 2019"
We all speak English here and read the same article right? Shipping fees are back to prepandemic levels but operating costs are much higher.
Why doesn't that count as a crisis or as something worth reporting?
If international trade declines, this could indeed tip the scales and give labor a stronger bargaining position across the globe. Less trade might mean fewer cheap imports and potentially more jobs for local industries. This shift could lead workers to demand higher wages and better working conditions, knowing that the globopatricians can't easily jump ship to cheaper labor markets.
The crisis is that their costs are now much higher but the going rate is the same so they’re now losing money.
A glut nearly always follows a shortage. Virtually every single time. So there is no contradiction at all in noting there was a severe shortage before but now there’s a glut.
I can’t wait for all the retailers who jacked their prices and advertised that it was directly due to shipping by rates to also now similarly advertise a massive drop in prices …
I agree here, some of these headlines are based upon the outlier effect of economic whiplash stemming from the pandemic -- hard to have economic models keep up. Now companies are returning to pre-pandemic activity, and apparently, it's a catastrophe... We should try postulating what was economically forecast prior to the pandemic boom-bust-whiplash.
That’s a pretty manipulative graph. Show the pre pandemic spot rates! From the article “ Box-ship operators were among the biggest pandemic winners. Orders for imported goods began to climb in 2020 …” so why doesn’t it show 2020 then?
Still, carriers are feeling the price drops for sure. But it is way less dramatic then it was during 2008 onwards. Those rates back then were close to unsustainable for carriers. They nice for the shippers so, but the days of up to two weeks without container retention fees are gone for good.
Looking at the exact same source as the WSJ graphic used, you can see it was quite cherrypicked: https://fbx.freightos.com/
From that source, the average rate in May 2019 was about $1350, and according to the most recent datapoint, it's currently at about $1450. In 2019 dollars (using CPI), that's about $1220.
Seems like it is down 10%, but that's not nearly as dramatic as the WSJ graph would make it appear.
Yes, seems the rates are exactly back to the same level they had been comfortably been sitting at for years before the pandemic: https://fbx.freightos.com/
Not saying that the article's framing is correct, but being at the 30y average does sound like a bad situation for shipping companies - they must have had some rising costs.
The medium is the message. If you were reading the print version, it likely wouldn't have an editorialized headline. Those are often changed in the 24 hours after publication. But ink is forever.
The shock of the onset and "anti"-shock of the fizzling of the pandemic must be the most dramatic economic experiment for some time.
Its like throwing a stone in a stagnant pond and watching the waves go up and down.
Except the economic fluid is far more complex, full of lags and hysteresis. E.g. shipping rates have gone down but not the costs (indicated as fuel and labor). Why not?
Nobody wants to leave a crisis go to waste (i.e. groups of people will try to maximize and make their monetary gains permanent) but there are restoring forces towards the underlying equilibrium supply and demand balances.
> Except the economic fluid is far more complex, full of lags and hysteresis. E.g. shipping rates have gone down but not the costs (indicated as fuel and labor). Why not?
It's much weirder. Economics is even fuller of anti-lags, ie clever economic actors are constantly planning for the future and anticipating. Eg if the Fed announces today, that they are going to run the printing presses red-hot next year, you'd already see inflation starting now.
That anticipation is why stock prices started to recover when we were still in the very middle of the pandemic. Contrary to popular opinion, investors are rather long sighted and forward looking. (They just don't always believe managers when they say 'trust me bro, our long term plan might lose money now, but it's totally gonna pay off anytime soon'; and that's why they demand regular quarterly profits from run-of-the-mill management, but let Bezos run Amazon for decades without anything in the way of dividends.)
> Contrary to popular opinion, investors are rather long sighted and forward looking
Contrary to popular opinion investors are a very inhomogeneous crowd: From real economy investors, like the shipping company that tries to anticipate long-term global economic supply and demand patterns and orders massively expensive ships that will only be delivered years down the line, to bloomberg types or crypto speculators or HFT algos, that basically just look at financial timeseries going up or down, detached from any economic, environmental or social reality.
To abuse the liquid analogy just bit more, the fluid is composed of all sorts of molecules. Heavy ones with lots of inertia but also lots of small scale noise. As things are, the incoherent noise sometimes turns coherent (hypes, manias and other delusions) and then the tail wags the dog (to finally switch metaphor :-)
I'm sure some are profiting handsomely, but as a whole the last 3 years has made business in general look pretty incompetent. They all seemed to zig when they should have zagged and vice versa. It makes you think the professionals are not all they're cracked up to be.
I know the pandemic was new and disorienting, but do these people have no contrarian instincts at all? They just look at what everyone else is doing and do that, lest they stand out and be singled out? If you're in a leadership position and you play the "everyone thought X so you can understand why I did too" card you should be fired.
Yes, the demand shocks of the pandemic restriction and easing of restrictions, combined with the bullwhip effect (https://en.wikipedia.org/wiki/Bullwhip_effect) have created a very interesting case study in industrial dynamics
Interest on excess reserves explains much of that change.
In the olden days of 2007, banks would only hold as many reserves at the Fed as they legally needed. They would instead invest any extra (or make their deposits less attractive, so that they have fewer excess reserves).
In 2008 the Fed started paying interest on reserves above the legally minimum (so called excess reserves).
Excess reserves parked at the Fed don't contribute to the economy, but are still counted in the Fed balance sheet.
You can see on https://fred.stlouisfed.org/graph/?g=15mr6 how the level of reserves at the Fed shot from about 0.050 trillion USD in 2007 to about 3 trillion USD today.
Most of them will be fine, but probably a couple will consolidate or collapse. They'll start to delay or cancel new ships because who knows how long this will last, and we'll probably end up in an other crisis eventually if they all cut back too much.
Cry me a river. CMA-CGM has made 40 billion € of profit in the past three years. I suppose Maersk and other large shipping companies are on the same boat (uh uh).
> CMA-CGM has made 40 billion € of profit in the past three years.
And it seems like they didn't do the responsible thing and set it aside in a rainy-day fund, but instead they and their competitors went on a shopping spree.
Honestly, the way things have went in the past, I'd say a maximum of three years before the first one whines and calls for government subsidies.
What'd they purchase? It's arguably better for some of that money to continue circulating in the economy vs being parked in investments and savings that essentially create money out of nothing, accruing interest or profiting from speculation. Of course it does make sense to do that with a portion, perhaps, but I wouldn't say "all". And I do share your disdain with government bailouts.
Shipping companies were giving 8-10 month salary bonuses last year because of the price boom they were enjoying. The supply and demand disruptions created a unique situation for them and now I think price are going back to normal.
Readit News
Hard to really feel like this is a crisis, since all of the reporting is how there was a brief, glorious period (for the companies) of 10x prices, and the crisis is that the period is ended.
Journalists talking about the future. That’s not journalism.
We all speak English here and read the same article right? Shipping fees are back to prepandemic levels but operating costs are much higher.
Why doesn't that count as a crisis or as something worth reporting?
Wages go up: crisis that could destroy our economy.
A glut nearly always follows a shortage. Virtually every single time. So there is no contradiction at all in noting there was a severe shortage before but now there’s a glut.
https://www.xeneta.com/blog/weekly-container-rate-update-wee...
Or here:
https://www.xeneta.com/blog/weeek-20-manzanillos-star-on-the...
Still, carriers are feeling the price drops for sure. But it is way less dramatic then it was during 2008 onwards. Those rates back then were close to unsustainable for carriers. They nice for the shippers so, but the days of up to two weeks without container retention fees are gone for good.
From that source, the average rate in May 2019 was about $1350, and according to the most recent datapoint, it's currently at about $1450. In 2019 dollars (using CPI), that's about $1220.
Seems like it is down 10%, but that's not nearly as dramatic as the WSJ graph would make it appear.
its exactly at the historical 30 year average. nothing to see here lol
https://www.balticexchange.com/en/data-services/market-infor... ostensibly has some information on the index, but it's hard to tell.
If it's not inflation adjusted, then being on the 30 year nominal average is actually a substantial decline in real costs over time.
BORING
So you just reduce your time scale and talk about the massive drop.
I’m shocked they didn’t have a headline that said “If current price drops continue, by 2025 container rates will be negative!!”
Its like throwing a stone in a stagnant pond and watching the waves go up and down.
Except the economic fluid is far more complex, full of lags and hysteresis. E.g. shipping rates have gone down but not the costs (indicated as fuel and labor). Why not?
Nobody wants to leave a crisis go to waste (i.e. groups of people will try to maximize and make their monetary gains permanent) but there are restoring forces towards the underlying equilibrium supply and demand balances.
It's much weirder. Economics is even fuller of anti-lags, ie clever economic actors are constantly planning for the future and anticipating. Eg if the Fed announces today, that they are going to run the printing presses red-hot next year, you'd already see inflation starting now.
That anticipation is why stock prices started to recover when we were still in the very middle of the pandemic. Contrary to popular opinion, investors are rather long sighted and forward looking. (They just don't always believe managers when they say 'trust me bro, our long term plan might lose money now, but it's totally gonna pay off anytime soon'; and that's why they demand regular quarterly profits from run-of-the-mill management, but let Bezos run Amazon for decades without anything in the way of dividends.)
Contrary to popular opinion investors are a very inhomogeneous crowd: From real economy investors, like the shipping company that tries to anticipate long-term global economic supply and demand patterns and orders massively expensive ships that will only be delivered years down the line, to bloomberg types or crypto speculators or HFT algos, that basically just look at financial timeseries going up or down, detached from any economic, environmental or social reality.
To abuse the liquid analogy just bit more, the fluid is composed of all sorts of molecules. Heavy ones with lots of inertia but also lots of small scale noise. As things are, the incoherent noise sometimes turns coherent (hypes, manias and other delusions) and then the tail wags the dog (to finally switch metaphor :-)
I know the pandemic was new and disorienting, but do these people have no contrarian instincts at all? They just look at what everyone else is doing and do that, lest they stand out and be singled out? If you're in a leadership position and you play the "everyone thought X so you can understand why I did too" card you should be fired.
Value of assets on the balance sheet of the Federal Reserve in 2007: 0.9 trillion
Value of assets on the balance sheet of the Federal Reserve in 2022: 9 trillion
In the olden days of 2007, banks would only hold as many reserves at the Fed as they legally needed. They would instead invest any extra (or make their deposits less attractive, so that they have fewer excess reserves).
In 2008 the Fed started paying interest on reserves above the legally minimum (so called excess reserves).
Excess reserves parked at the Fed don't contribute to the economy, but are still counted in the Fed balance sheet.
You can see on https://fred.stlouisfed.org/graph/?g=15mr6 how the level of reserves at the Fed shot from about 0.050 trillion USD in 2007 to about 3 trillion USD today.
You mean it is learning? Hysteresis is "local learning".
https://en.wikipedia.org/wiki/Hysteresis
Dead Comment
And it seems like they didn't do the responsible thing and set it aside in a rainy-day fund, but instead they and their competitors went on a shopping spree.
Honestly, the way things have went in the past, I'd say a maximum of three years before the first one whines and calls for government subsidies.
It's a big shift from 2021, sure, but nobody is surprised by that. It is a slump from 2019, rather than "cratering".