The collapse of global shipping has begun

[ThePythonicCow]

.In the last two days, I've seen two articles, one written a decade ago, and the other a day ago, which, when combined, suggest to me that the shipping of low cost manufactured goods, from Chinese factories, to US and European markets, is about to collapse.

In the earlier article, from a decade ago, The great container smuggle (http://honestthings.blogspot.com/#115979822591797228), Ralph Schwan (whom I don't recall reading before) notices that there is something wrong with the cost of shipping goods from China to the US.

Schwann was puzzled when he learned that (even in 2006) many of the shipping containers used to ship goods across the Pacific Ocean by ship, then across the US by rail and truck, were not being sent back to China to be re-used. They sat empty, after one use, filling up lots in the US.

But then Schwann found this 2005 Spiegel article (http://www.spiegel.de/international/spiegel/spiegel-special-globalization-the-new-world-the-box-that-makes-the-world-go-round-a-386799.html) on shipping containers, which stated that Chinese shippers pay about $2500 per container. Building stuff is Schwann's business, and he knew that mass producing something with as much steel and welding as a shipping container would cost at least $6000 to $7000, in quantity.

So he figured out that the banks were subsidizing this ...by lending to build more containers, on terms that enabled the few, large, manufacturers of these containers to continue to make more and more of them, and sell them far below cost.

It was, and remains, another one of the Bankster Funded Bubbles, underlying our current economic situation. It simply never has, and still doesn't, make economic sense to manufacture such a high volume of low margin goods, that far from their market ... unless subsidized by unnatural market conditiions such as too easy bank lending.

Well ... such unnatural conditions apparently will not be applying for much longer.

In this article, posted yesterday, by one of my favorite commentators, Jim Willie, writing at USTBill Rejection at Ports in Progress (http://news.goldseek.com/GoldenJackass/1476475200.php), Jim Willie writes about the recent bankruptcy of Korea's largest shipping company, Hanjin Shipping, on August 31, 2016:



HANJIN SHIPPING CRISIS

The Hanjin crisis brings new headache to US-based importers. Trailers stack up, adding to client costs while trailer shortage looms. The idle containers are clogging the entire system. Confusion abounds, as emergency measures are being sought. A drop-off point system for the empties is being considered. Soon the used containers will become a newly created market for cargo owners. The bankruptcy of South Korea's Hanjin Shipping Co Ltd is causing ripple effects for importers bringing goods from Asian factories to the US marketplace. Port facilities are being jammed, while a shortage of trailers is created to move ocean shipping containers on US roads and railways. The world's seventh largest container carrier owns and transports more than half a million containers. They are in many cases clogging up ports and truck yards, tying up trailers that cannot be used to handle other cargo. The growing chaos is beginning to worry freight handlers at US ports on the West Coast. Witness the first sign of follow-on effects from the failure of Hanjin. The problem stems from Hanjin's shortage of cash, which has stranded $14 billion of cargo owned by companies such as HP Inc, Home Shopping Network, and Samsung Electronics. Much of the cargo have been stuck on over 100 ships at sea because cargo handlers, tug operators, and ports are refusing to work with Hanjin unless they are paid upfront. They all are aware of the risk of not receiving payment.

In recent weeks, terminal operators in the California ports of Long Beach and Oakland are not taking back empty containers. Many in the industry doubt Hanjin will pay storage costs, which has led to a growing backlog of empty containers and the trailers they sit on. The containers are stranded. Thousands of Hanjin containers are on trailers kept out of circulation. The uncertainty surrounding Hanjin appears to be pushing truckers to lock in trailers from the local organization pool. Maybe the vast pile-up of containers can be fashioned into sleek condominiums like in Detorit, like lego communities.

Simply stated, if a container reads the Hanjin label, there is no place for it to go. One intermediate solution put forth is the creation of a Drop-Off Point for containers after their cargo is discharged. In Southern California, shipping industry executives are discussing a staging area where truckers could drop off empty containers to free up trailers. Another mid-term solution has been proposed. The cargo owners could resort to buying the containers they hold, which would clear up any legal uncertainty around them, thereby enabling the return of chassis. A new niche market is emerging.

The above tells me that the Banksters helped fuel the move of American manufacturing to China over the last two decades, in part by artificially easy lending to manufacturers of shipping containers.

When the Banksters pull the plug on these container manufacturers, the cost of shipping anything that normally goes in a container will rise rapidly to their natural, much higher level. Until America rebuilds its own manufacturing, things that ship will cost a lot more, and be much less abundant.

This seems to be just another wonderful (?) example of the Banksters propensity to jerk us around with booms (based on too easy credit) and busts (when credit is withheld, our property repossesed, and our labor enslaved.)

[bluestflame]

that explains the often advertised low cost shipping containers for sale on ebay and gumtree etc , many buy to setup as site vans storage etc

[Daozen]

The rise in prices for cheap goods might push Americans to re-evaluate how much of this plastic crud they really need. They can start making things at home.... Maybe it'll restimulate interest in locally made items.

It's a precarious game of chess, but there's always an exit route.

[meat suit]

I can buy 'single trip' containers that still smell of fresh paint inside for £2500 in the UK..
I would have thought you can manufacture them for about that in bulk...

[Baby Steps]

I see it as a chinese financial inertia shenanigan.

Government banks pumping state created cash into steel industry, these loans are probably never going to perform.

Then the crony corruption encourages this process by discouraging the collection of used containers. So it's another form of dumping. The cronyism sustains the process because stopping it is politically too hard

Similar process to the on- going creation of ghost towns. They have not quite got the hang of capitalism yet, so in a way it's another symptom of political weakness.
Hope they get a handle on it.

Because their currency is state fiat it is less of a problem for the state to write off bad loans into the banking system, but still it's a global threat to markets

[Bill Ryan]

.
I have a question (maybe to Paul) about the Baltic Dry Index (https://en.wikipedia.org/wiki/Baltic_Dry_Index). It's currently just under 900, but earlier this year had slumped to its lowest-ever level, under 300. Economic analysts were talking about the collapse of global shipping then.

Here's the page I look at periodically. Does this show some degree of health?

http://bloomberg.com/quote/BDIY:IND

http://projectavalon.net/BDI_Oct_2016.gif

[mgray]

There's seasonality to shipping as US gears up for holiday shopping season. You see at the left side of the graph as shipping drops off as goods are brought in for year end season by Oct.

[Pam]

This may not be directly related to the shipping container theory, which I believe is right on but I have another observation. I ordered a package of glass art beads from ebay for a total price of .99cents, which included shipping. Imagine my surprise when the package arrived from China. I bet it would cost me 5.00 to send that product a mile away via USPS. In this scenario, not only do I get the product, but it is shipped from China to the US for under a dollar.

[Carmody]

the shipping containers are so low in price and there are so many of them, that the raw materials, ie the containers themselves....the raw containers, (in perfect shape no less)... to make a 2,000 plus square foot house (185 sq meters) is under $15kUS.

The raw wood materials for the frame of a wooden house, costs more. Foundation, cutting, welding, insulation, sealing off..etc...

It might be notably less expensive to make a shipping container house than a wood frame house.

$15kUS in raw costs -revisiting the calculations I did last year, which is where the above number came from- can net one, depending on the place the containers are purchased....about 3000 sq ft (280 sq M) of floor surface area, with 8.5ft high ceilings. Properly cleaned and prepped, that house material...might last...50 years with no maintenance.

And no mice! Or cars crashing through the front windows. A mite rectangular, though. Also hard to burn down.


Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take this power away from them, and all the great fortunes disappear, and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create money and control credit.

Attributed to Josiah Stamp by Silas W. Adams in The Legalized Crime of Banking (1958).

[Bill Ryan]

... to make a 2,000 plus square foot house (185 sq meters) is under $15kUS.



Like these! (Very impressive, too)

http://projectavalon.net/container_houses.jpg

:focus:

[Carmody]

Global shipping is also, in some critical ways... possible to be seen as the biggest polluter in the world, by a massive margin.

660US gallons of water to make one us beef pattie for a hamburger (watering the cow, etc). So taking a sponge bath to conserve water in the USA is a bit of a joke. Unbelievably so. People are deeply misled about their pollution sources.

Looking at global shipping's contribution to the overall toxicology and heavy metals environmental damage yields similar disparities. (http://projectavalon.net/forum4/showthread.php?8458-The-equivalent-of-2.85-billion-fewer-polluting-cars-on-the-road....for-60M)

The idea of pollution free cars is utterly meaningless in the face of ocean going global shipping.

In the same way, the same incredibly ridiculous ratio differential as the idea of 'taking a sponge bath to conserve water', when it takes 660 gallons of water to create one hamburger. A near 100:1 ratio of meaningless.

They've got you dancing on the end of a controlled string in an area of concern that..in worldly terms...is meaningless.

Global shipping is collapsing? That would be the best thing that has happened for the atmospheric and ocean environment in at least the last 50 years, most likely.

[Dash]

Been following Dr. Jim Willie for years(aka the Jackass as his mother used to call him, lol), I consider him somewhat a lone maverick, most of his predictions have turned out to come true and hes even funny to boot. Repeatedly he has been asked back onto the Keiser Report, but he will only do a podcast and RT won't allow a guest on who is voice only, Jim said he got threatened one time over in Costa Rica by some military looking guy after mentioning the Israelis in one of his interviews, seems like he is keeping a lower profile nowadays, notice that he only does voiceovers.
(Said that the Saudis have been sucking mainly water up from their oil fields and they have been lying about their reserves for decades, kinda explains why they have invaded the oil rich Yemen doesn't it.)
2yV9ahm8MA8

[joeecho]

Global shipping is collapsing? That would be the best thing that has happened for the atmospheric and ocean environment in at least the last 50 years, most likely.

Isn't that what the official story line of Agenda 21 is all about, limit the human parasite to protect the environment? Fewer humans, fewer shipping needs. Of course the elite will still have their mega yachts etc.

[araucaria]

Student accommodation on campus at Le Havre, France's largest port.

34403

[lucidity]

... to make a 2,000 plus square foot house (185 sq meters) is under $15kUS.




Like these! (Very impressive, too)

http://projectavalon.net/container_houses.jpg

:focus:

They look fantastic...
I wonder how long those containers will last.
They are going to rust.. the question is, how quickly ?
Perhaps a coat of zinc paint might last 5 or 10 years.

The bulk of the cost would be having your set of containers
wired for electricity, plumbed-in for water and sewage
and decorated internally.

I wonder also if you'd need special permission from
the local authorities to use these as a residence, or not.

[avid]

http://www.restart.org.nz
After the major earthquakes in Christchurch, New Zealand, they built an 'earhquake safe' shopping mall in the destroyed city centre, fantastic regeneration, using containers!
Sorry for digression....

[Watching from Cyprus]

.
I have a question (maybe to Paul) about the Baltic Dry Index (https://en.wikipedia.org/wiki/Baltic_Dry_Index). It's currently just under 900, but earlier this year had slumped to its lowest-ever level, under 300. Economic analysts were talking about the collapse of global shipping then.

Here's the page I look at periodically. Does this show some degree of health?

http://bloomberg.com/quote/BDIY:IND
http://projectavalon.net/BDI_Oct_2016.gif

Hi Bill,
Now we know that BD index even being at the lowest level ever, did not trigger a collapse in the sector.
If you take the oil price chart with monthly moving average you will find an almost identical chart.
"People" like oil at $50.
I personally know the owners of one of the largest shipping companies in the world, who i met with last time 3 years ago.
They had every year spend their profits in acquiring new vessels, but 3 years ago, they stopped as they said, there will not be any growth in shipping in the near term.
If my opinion and feeling is of your interest, being in the financial world for 30 years, i see the current situation as the Eye of The Storm, and we are in the Eye now.

Love and peace wishes from
Peter

[Cardillac]

the minute shipping would be restricted would be the minute all of our lives would be greatly affected;

we all are still living under maritime law (based on Roman law) and not in a so-called democracy:

hasn't anyone not yet noticed that all official documents end in Latin?

hasn't anyone not yet noticed that Naval Intelligence (in every country in the world) always seems to have been more important than army or or air force intelligence?- WHY?-

my estimation: we live under law of the seas-

Larry

P.S. thank you Jordan Maxwell for bringing this to my attention

[shaberon]

It was not all that long ago that the dock workers at the one port around here (Wilmington) went on strike for better wages. They were making $20 per hour, plus a flat fee of $85 for every container unloaded.

Truckers are not too far off the mark, and I doubt train workers are either. None of that equipment is cheap; I looked at some kind of railroad tool one time, can't remember what, it was like a railroad equivalent of a hammer drill or something like that, but since it was made by a specialty company, it cost five times as much as a normal one.

Electrical power is very heavily subsidized, just think of all the man hours for guys to go up with chainsaws clearing trees away from lines.

I believe almost all of our businesses are running on big credit cards; the ones that have filed for bankruptcy keep increasing. No one in their right minds could be using shipping containers one time. I once knew someone whose family operated a pallet recycling plant--for those little wooden pallets they ship about four hundred pounds of groceries on. That was a lucrative enterprise. Buying a shipping container for one use, even if it has resale value, must be on a credit basis.

If the shipping diminishes in terms of less plastic lawn chairs, and stuff like that, maybe it is for the better...but yes, if it came to a complete halt of necessities, it would be almost immediately devastating to some place like the U. S.

Panama & Suez canals are probably some of the most significant things mankind ever made.

[Fellow Aspirant]

...Aaaaaaaaaaaaaand CUE the U.S. government's latest big idea to help veterans become viable income earners:

http://www.joc.com/trucking-logistics/labor/us-grants-1-million-train-military-veterans-truck-drivers_20161018.html

Granted, a $1 million waste is a pittance by federal standards, but surely giving vets such hope and training is a cruel thing to do.
Never mind that Robo-drivers are just down the road for the big rigs.
My gawd, such awful planning.

B.

[Bill Ryan]

.
Update from The Maritime Herald:

http://maritimeherald.com/2016/hanjin-shipping-cuts-400-employees-in-south-korea

Hanjin Shipping cuts 400 employees in South Korea

The bankrupting container operator Hanjin Shipping cuts 400 land-based employees in South Korea, aiming to restructure the business and improve survive. The shipper, which applied for court receivership in late August after creditor banks withdrew their support, has about 700 land-based employees in South Korea, which will be reduced by more than 60%. Hanjin Shipping introduced its plan to the labor organizations, giving a prior notice to the 400 employees in November for ending labor relationship by December. The cuts of ground employees in South Korea follow a massive wave of lay-offs in the offices of the shipping operator world wide.

[TargeT]

When the Banksters pull the plug on these container manufacturers, the cost of shipping anything that normally goes in a container will rise rapidly to their natural, much higher level. Until America rebuilds its own manufacturing, things that ship will cost a lot more, and be much less abundant.

This seems to be just another wonderful (?) example of the Banksters propensity to jerk us around with booms (based on too easy credit) and busts (when credit is withheld, our property repossesed, and our labor enslaved.)

How rapidly though? certainly not very rapid I think, since we have a good "stock pile" of containers (clearly) and the average life of a container is pretty long.. this may cause an issue in a 5-10 year scale, I don't see a rapid change unless a large portion of containers need to be replaced for some reason.


On a side note, I just purchased a 40" container for about $3,000 (and some old grocery store shelving, enough to line both sides of the "back" 20 feet with floor to ceiling shelves, got those for $200)... So worth it! I'm planning on getting a 20" and building something out of the two... might as well take advantage of cheap prices now!

[ThePythonicCow]

How rapidly though? certainly not very rapid I think, since we have a good "stock pile" of containers (clearly) and the average life of a container is pretty long.. this may cause an issue in a 5-10 year scale, I don't see a rapid change unless a large portion of containers need to be replaced for some reason.
Good point - this probably won't be an overnight "world has come to an end" trigger, but rather one of the factors feeding into a longer term shift away from moving manufacturing half way around the world just to save a few cents per item in labor costs.

On the other hand, I suspect much of that "stock pile" is in the wrong place, and getting it to the right place isn't free either.

[ThePythonicCow]

How rapidly though? certainly not very rapid I think, since we have a good "stock pile" of containers (clearly) and the average life of a container is pretty long.. this may cause an issue in a 5-10 year scale, I don't see a rapid change unless a large portion of containers need to be replaced for some reason.
Good point - this probably won't be an overnight "world has come to an end" trigger, but rather one of the factors feeding into a longer term shift away from moving manufacturing half way around the world just to save a few cents per item in labor costs.

On the other hand, I suspect much of that "stock pile" is in the wrong place, and getting it to the right place isn't free either.

Actually, on the third hand, there is a "sudden" aspect to this.

As usually happens when economic activity is overly influenced by excessive debt, there comes a time when the borrowers can only keep going by borrowing increasingly more. Within days of the bank cutting off the lending, and/or calling in existing loans, the borrower is bankrupt.

The few large manufacturers of containers are in such a bind, apparently, and continue in business at the pleasure of the lending banks. They could fail suddenly with a downturn in business or a tightening of their bank credit.

If (when) they fail, it would not necessarily and instantly put their customers, manufacturers and shippers using their containers out of business too ... but it would increase the shipping costs and delays of their customers. With continued stress on margins and declining markets, such additional burdens could be difficult for those manufacturers and shippers to bear. Since they too are likely mostly over indebted ... change (collapse, bankruptcy, ...) could come quickly, with the rise in container costs being one of the factors.

When you're deep in debt, with thin margins, and your volume shrinks, while your expenses increase and when the bank resists further lending to you ... you can go from a thriving business to ancient history ... all too quickly.

This is exactly as the bankers (or the elite controlling banking) have operated, for centuries. They take a percentage of profits during the good times, and repossess, foreclose or "privatize" (buy up for pennies on the dollar) in bad times. They decide when is good and when is bad, and who will profit and who will fail, by their lending policies.

Nice job if you can get it (and if you're sufficiently ethically challenged.)

[TargeT]

... but it would increase the shipping costs and delays of their customers.

This could cause a "chain-reaction" depending on the length of the delay. Most stores have a roughly 3-4 days of a "average consumption rate" supply of goods (http://tobyhemenway.com/419-fear-and-the-three-day-food-supply-3/); a delay of 7+ days could cause some real ugly food panic (https://www.redcross.org/images/MEDIA_CustomProductCatalog/m4440181_Food_and_Water-English.revised_7-09.pdf) as the average house hold only had around 3-5 days worth of food on hand & the average US citizen thinks 3 meals a day are mandatory (https://www.scientificamerican.com/article/how-long-can-a-person-sur/).

[ThePythonicCow]

This could cause a "chain-reaction" depending on the length of the delay. Most stores have a roughly 3-4 days of a "average consumption rate" supply of goods (http://tobyhemenway.com/419-fear-and-the-three-day-food-supply-3/); a delay of 7+ days could cause some real ugly food panic (https://www.redcross.org/images/MEDIA_CustomProductCatalog/m4440181_Food_and_Water-English.revised_7-09.pdf) as the average house hold only had around 3-5 days worth of food on hand & the average US citizen thinks 3 meals a day are mandatory (https://www.scientificamerican.com/article/how-long-can-a-person-sur/).
Such an event might resemble boot camp in the army ... dramatic changes can be made in how most people will respond to "martial law" (aka tyranny) by forcing them through a few weeks of harsh disconnection from all their customary comforts and life style, with sleep deprivation and a harsh drill sargeant barking in their face.

A few weeks of enforced breakdown in normal society and economic order, with intermittent deprivation of food, water, electricity, ... and with fear mongering threats coming over the media and by house-to-house patrols and bull-horn warnings ... and with various reports of chemical, biological or nuclear weapons of mass terror near and far ... could bring a society to "heel" nicely (well, not very "nice".)

Unfortunately, older people who have started figuring things out for themselves don't do so well in bootcamp. That's one reason why the military has always preferred to draft young men (well, now, also young LGBT and other gender-variants <grin>). Sometimes you just have to shoot, or send to Siberia, the old codgers who just won't get with the program.

[Foxie Loxie]

Guess I would be one of those shot! :waving: