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Christmas is going to be cancelled and people are freaking out.

The headlines are full of disaster, doom & depression πŸ‘‡



That said, even the SEC could have seen this coming.

The disruption has persisted for months, but somehow everyone muddled through.

Now it's going to seriously impact profits and potentially limit Christmas sales...

Not a pretty picture...


It's all looking very peakish.

We've even got the infamous contrarian magazine cover πŸ‘‡

I'm definitely not qualified to call a top in shipping costs, (and to my uneducated eye it looks like the kind of problem that will take a while to fix), but perhaps we've found the maximum pain point.

Nikkei / Caixin reported that the spot rate between China and the US West Coast almost halved this past week. πŸ‘‡

The route is operated by Matson, one of the biggest U.S. container freight companies.
Matson said it has nothing to do with the slump in spot shipping rates, and the Oct. 2 long-term rate for shipping a 40-foot container from China to the West Coast it reported to the Shanghai Shipping Exchange was up $200 from a month earlier.
An analyst at Tianfeng Securities said that shipping companies often set the long-term rates, but the spot rates quoted by shipping forwarders are the actual market prices determined by supply and demand.
The plunge in spot shipping rates, the analyst said, is mainly caused by the imminent off-season and a reduction in manufacturing due to China's ongoing power crunch.
As production restrictions began to be implemented, scalpers dumped their hoarded container spots, contributing to the price tumble, the source from the Shanghai shipping company said. He added that the scalpers had to rush to sell off the spots between Oct. 1 and Oct. 7 before the start of the seven-day Chinese National Day holiday, which starts at the beginning of the month.

The biggest question is whether this will be temporary or a sign of things to come.

I'd bet on it being a sign of things to come, although elevated rates will likely take time to come back down as supply and demand rebalance.

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Back in May, we discussed how these supply chain disruptions would lead to a disruption for the shipping industry itself via automation & innovation. πŸ‘‡

πŸ”” Supply chains and choke points
Do you know your chokepoints?

Drewry has noted the green shoots already:

Increasing automation is good for profits, not so good for anyone wanting a job in the port...

Looking specifically at the cost structure of APM Terminals (fifth largest container terminal operator globally), they found that every 10% reduction in labour cost improved margins by 3.2%.

As the largest fixed cost, it will surely be targeted for savings (and set up battles with unions) πŸ‘‡

Not exactly innovative though. More a continuation of the established global trend towards automation.

Congested port storage yards have been a huge problem, and high storage systems such as BOXBAY are definitely part of the solution:

Companies such as Kalmar (Cargotec) have already seen increasing demand for digitisation and automation πŸ‘‡

Container ship orders hit record highs earlier this year too πŸ‘‡

Orders for container newbuilds reach record high
2021 is on track to set a new record for orders for container vessels. Transactions involving secondhand vessels have already surpassed 2017, the previous record-breaking year, according to new figures from Clarksons Research.

Overall, the pieces are falling into place for a more resilient, efficient supply chain in future.

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