6 ms·

> The containership industry is a good illustration of the supply chain mess: as shown in the first chart, more than 70 containerships are stacked up outside Lo

by aazaa 5y ago

> The containership industry is a good illustration of the supply chain mess: as shown in the first chart, more than 70 containerships are stacked up outside Los Angeles/Long Beach ports waiting to unload. Idle containerships are back to just 3% of the total fleet, shipping costs are surging, manufacturing delivery times are extended and rail shipments are declining sharply from their summer peak, illustrating the far reaching impact of the delays. I'm surprised that the article doesn't take up what happens when that logjam eventually clears. At some point those ships will clear out of LA and there will be no more pile up. All the goods will have been distributed. Meanwhile, the world's container ship capacity will have increased by some large factor (30%, 50%) to address the shortage. Fast forward 1-2 years and we have a world that's a mirror image of today's: surplus everything. Too much oil. Too much container ship capacity. Too many semiconductors. Too many employees. It's not like COVID increased overall world demand relative to 2019. Rather, it created a log jam getting everything back to normal. The current action in Washington DC around the budget sets the stage for rollback of the massive government transfers and deficit spending of the last 18 months. Eventually, those evictions will happen. Eventually. Demand shocks can work both ways.

Ericson2314 5y ago
We should permanently boost demand which will allows environment investments to pan out better and make us all richer. But too bad, we rather have loose labor markets to better lord it over the masses than more prosperity for them and us. In fact, we unlearned economics --- "boosting remand has no long term effect because..." --- to better doublethink and not confront the fact that we were anti-growth.
- deleted 5y ago
  [deleted]
cracker_jacks 5y ago
This is a well-known phenomenon known as the bullwhip effect (https://en.wikipedia.org/wiki/Bullwhip_effect https://en.wikipedia.org/wiki/Bullwhip_effect).
- crubier 5y ago
  Thank you for this, this was really interesting, I think this effect is not known enough. It is similar to pilot-induced oscillation in aerospace https://en.wikipedia.org/wiki/Pilot-induced_oscillation https://en.wikipedia.org/wiki/Pilot-induced_oscillation but with several layers of pilots
  - nextaccountic 5y ago
    I've never heard of it before, but pilot-induced oscillation seems to be an instance of more general phenomena in control theory called ringing, which happens when there is too much overshoot (when the system goes past the desired position when you're trying to control it). To avoid having the system oscillate due to ringing we often need to lower the amount of overshoot, but by doing so we inevitably make our own control response slower. https://en.wikipedia.org/wiki/Overshoot_(signal) https://en.wikipedia.org/wiki/Overshoot_(signal) https://en.wikipedia.org/wiki/Ringing_(signal) https://en.wikipedia.org/wiki/Ringing_(signal) This is specially bad for systems with non-minimum phase. Such systems have a counter-intuitive property: once you give it an input, for example, to move in a certain direction, it first moves in the opposite direction (which is called undershoot) and then, after a delay, it moves to the desired position, and perhaps overshoot. The trouble is that as the system undershoots the control operator might be tempted to increase the signal to counteract this, but it makes things worse, increasing the undershoot and, after the relevant delay, the system will severely overshoot. There's a mathematical theorem that says that if the delay is too great it's impossible to control a system like this. https://ealizadeh.com/blog/non-minimum-phase-systems https://ealizadeh.com/blog/non-minimum-phase-systems PS: since control theory and signal processing share an underlying theory of linear, time-invariant systems, there's an analogous phenomenon on signal processing, https://en.wikipedia.org/wiki/Ringing_artifacts https://en.wikipedia.org/wiki/Ringing_artifacts - this kind of graph https://en.wikipedia.org/wiki/Ringing_artifacts#/media/File:High_accuracy_settling_time_measurements_figure_1.png https://en.wikipedia.org/wiki/Ringing_artifacts#/media/File:... shows that ringing in signal processing and in control theory have the same mathematical treatment, and in both cases the cause is overshooting too much.
    - 5y ago
HWR_14 5y ago
I think you underestimate this effect. Container ships are slow to build, semiconductor plants aren't being built, etc. We might have too many containers, but that's the only glut I can see on the horizon.
- NumberCruncher 5y ago
  I know at least one newly opened semiconductor plant. Link: https://www.infineon.com/cms/en/about-infineon/press/press-releases/2021/INFXX202109-098.html https://www.infineon.com/cms/en/about-infineon/press/press-r...
  - tlamponi 5y ago
    But it wasn't build and opened due to the recent shortage, it was planned since quite a bit longer for fulfilling a more general, stable demand. Same with Intel's new Arizona plant which began construction recently, it is not a reaction due to the current shortage, but to improve USA's domestic access to high-end modern semiconductor tech and due to Intel's shifted business plans to provide fab services for others. So, while there will be semiconductor plants opening, they won't cause a bull-whip-effect. The need is more permanent for those fabs, and they're planned since years.
  - knownjorbist 5y ago
    Intel just broke ground on a $20bn plant in Arizona.
    - HWR_14 5y ago
      You mean the plant that's been in discussions since at least 2014[0] and isn't really related to COVID at all? [0] https://www.pcmag.com/news/intel-scraps-plans-to-open-cutting-edge-arizona-chip-plant https://www.pcmag.com/news/intel-scraps-plans-to-open-cuttin...
      - ta988 5y ago
        Yes my guess is that they are trying to get government support for building it now that it is even more strategic.
golergka 5y ago
> It's not like COVID increased overall world demand relative to 2019. Didn't it? Transition to remote work not only nudged a lot of people to buy stuff, but opened a lot of jobs that were previously only available in US/Europe to people all around the globe, radically increasing their disposable incomes. I don't know how big of an effect it is so far — probably limited to our industry. But I don't think it's going to be this way just because of how much of an economic advantage is it to anyone except US/Europe white collar workers.
- kybernetyk 5y ago
  Remote work is only a minuscule part of the overall economy. Most people can’t just transition to remote work as they need to be on site.
- hef19898 5y ago
  That change in demand would at most show in some fraction of a percentage point in the overall picture. If at all.
- intended 5y ago
  It changed demand. So some items increased in popularity.
WA 5y ago
> It's not like COVID increased overall world demand relative to 2019. Well, the article says that demand did increase a lot: > Demand for many of these items soared during the pandemic as people built out home offices and related projects But yeah, the coming overcapacity isn’t addressed.
intended 5y ago
Last I read up, The number of ships had been reduced, so saying there is a capacity increase is news to me. Where did you hear of this?
moonchrome 5y ago
> Meanwhile, the world's container ship capacity will have increased by some large factor (30%, 50%) to address the shortage. Possible but I doubt it. Container ships take years to build, there are backorders, people ordering them make these forecasts, shipyards were hit by COVID as well, they require all those supplies in short supply right now to start building. I think the silicon fabs popping up all over the world are not because of the demand spikes necessarily but estimated demand growth, political motives (very few countries are comfortable with current situation of most top end fab capacity being located in Taiwan).
- maxk42 5y ago
  Actually, this is normal in the container shipping industry. Oversupply is the very likely result of this within 24 months. (Likely very much less.). Most of the oversupply typically comes from recycled ships and not new manufacturing. However, even during a downturn new manufacturing doesn't cease because container ships have a very short lifetime. New ships are sold typically in just a few years to smaller operations which in turn resell them again to smaller firms. At the end of their lifetimes, the ships inwill be owned by tiny (typically) East-Asian operators which will spend more time and money jury-rigging them to stay afloat than operating them under contract. The sea is not kind to steel. But when rates are high, even an old clunker can be run profitably, so these small operations with one or two rusting ships which are essentially lemons can continue operating them at a profit until rates dive again.
arisAlexis 5y ago
Covid did increase semiconductor market due to everyi going online and also other sectors like simple consumer electronics,cameras etc. This trend will probably not end. Humanity is going towards more tech every year.
reaperducer 5y ago
Meanwhile, the world's container ship capacity will have increased by some large factor (30%, 50%) to address the shortage. How long do you think it takes to build a container ship? It's in the area of three years in the best of times when you have a good supply of workers and raw materials and building capacity.
throw0101a 5y ago
> At some point those ships will clear out of LA and there will be no more pile up. All the goods will have been distributed. Meanwhile, the world's container ship capacity will have increased by some large factor (30%, 50%) to address the shortage. They'll be scrapped: * https://www.marineinsight.com/shipping-news/275-cargo-vessels-sold-for-scrap-in-h1-2021-40-rise-as-compared-to-2020-vesselsvalue/ https://www.marineinsight.com/shipping-news/275-cargo-vessel... * https://www.recyclingtoday.com/article/ship-recycling-steel-2021-bangladesh-india-pakistan/ https://www.recyclingtoday.com/article/ship-recycling-steel-... Or at least the oldest, smallest, least efficient ones will be.

by aazaa 5y ago

Ericson2314 5y ago

We should permanently boost demand which will allows environment investments to pan out better and make us all richer. But too bad, we rather have loose labor markets to better lord it over the masses than more prosperity for them and us. In fact, we unlearned economics --- "boosting remand has no long term effect because..." --- to better doublethink and not confront the fact that we were anti-growth.

deleted 5y ago
[deleted]

cracker_jacks 5y ago

This is a well-known phenomenon known as the bullwhip effect (https://en.wikipedia.org/wiki/Bullwhip_effect https://en.wikipedia.org/wiki/Bullwhip_effect).

crubier 5y ago
Thank you for this, this was really interesting, I think this effect is not known enough. It is similar to pilot-induced oscillation in aerospace https://en.wikipedia.org/wiki/Pilot-induced_oscillation https://en.wikipedia.org/wiki/Pilot-induced_oscillation but with several layers of pilots
- nextaccountic 5y ago
  I've never heard of it before, but pilot-induced oscillation seems to be an instance of more general phenomena in control theory called ringing, which happens when there is too much overshoot (when the system goes past the desired position when you're trying to control it). To avoid having the system oscillate due to ringing we often need to lower the amount of overshoot, but by doing so we inevitably make our own control response slower. https://en.wikipedia.org/wiki/Overshoot_(signal) https://en.wikipedia.org/wiki/Overshoot_(signal) https://en.wikipedia.org/wiki/Ringing_(signal) https://en.wikipedia.org/wiki/Ringing_(signal) This is specially bad for systems with non-minimum phase. Such systems have a counter-intuitive property: once you give it an input, for example, to move in a certain direction, it first moves in the opposite direction (which is called undershoot) and then, after a delay, it moves to the desired position, and perhaps overshoot. The trouble is that as the system undershoots the control operator might be tempted to increase the signal to counteract this, but it makes things worse, increasing the undershoot and, after the relevant delay, the system will severely overshoot. There's a mathematical theorem that says that if the delay is too great it's impossible to control a system like this. https://ealizadeh.com/blog/non-minimum-phase-systems https://ealizadeh.com/blog/non-minimum-phase-systems PS: since control theory and signal processing share an underlying theory of linear, time-invariant systems, there's an analogous phenomenon on signal processing, https://en.wikipedia.org/wiki/Ringing_artifacts https://en.wikipedia.org/wiki/Ringing_artifacts - this kind of graph https://en.wikipedia.org/wiki/Ringing_artifacts#/media/File:High_accuracy_settling_time_measurements_figure_1.png https://en.wikipedia.org/wiki/Ringing_artifacts#/media/File:... shows that ringing in signal processing and in control theory have the same mathematical treatment, and in both cases the cause is overshooting too much.
  - 5y ago

HWR_14 5y ago

I think you underestimate this effect. Container ships are slow to build, semiconductor plants aren't being built, etc. We might have too many containers, but that's the only glut I can see on the horizon.

NumberCruncher 5y ago
I know at least one newly opened semiconductor plant. Link: https://www.infineon.com/cms/en/about-infineon/press/press-releases/2021/INFXX202109-098.html https://www.infineon.com/cms/en/about-infineon/press/press-r...
- tlamponi 5y ago
  But it wasn't build and opened due to the recent shortage, it was planned since quite a bit longer for fulfilling a more general, stable demand. Same with Intel's new Arizona plant which began construction recently, it is not a reaction due to the current shortage, but to improve USA's domestic access to high-end modern semiconductor tech and due to Intel's shifted business plans to provide fab services for others. So, while there will be semiconductor plants opening, they won't cause a bull-whip-effect. The need is more permanent for those fabs, and they're planned since years.
- knownjorbist 5y ago
  Intel just broke ground on a $20bn plant in Arizona.
  - HWR_14 5y ago
    You mean the plant that's been in discussions since at least 2014[0] and isn't really related to COVID at all? [0] https://www.pcmag.com/news/intel-scraps-plans-to-open-cutting-edge-arizona-chip-plant https://www.pcmag.com/news/intel-scraps-plans-to-open-cuttin...
    - ta988 5y ago
      Yes my guess is that they are trying to get government support for building it now that it is even more strategic.

golergka 5y ago

> It's not like COVID increased overall world demand relative to 2019. Didn't it? Transition to remote work not only nudged a lot of people to buy stuff, but opened a lot of jobs that were previously only available in US/Europe to people all around the globe, radically increasing their disposable incomes. I don't know how big of an effect it is so far — probably limited to our industry. But I don't think it's going to be this way just because of how much of an economic advantage is it to anyone except US/Europe white collar workers.

kybernetyk 5y ago
Remote work is only a minuscule part of the overall economy. Most people can’t just transition to remote work as they need to be on site.
hef19898 5y ago
That change in demand would at most show in some fraction of a percentage point in the overall picture. If at all.
intended 5y ago
It changed demand. So some items increased in popularity.

WA 5y ago

> It's not like COVID increased overall world demand relative to 2019. Well, the article says that demand did increase a lot: > Demand for many of these items soared during the pandemic as people built out home offices and related projects But yeah, the coming overcapacity isn’t addressed.

intended 5y ago

Last I read up, The number of ships had been reduced, so saying there is a capacity increase is news to me. Where did you hear of this?

moonchrome 5y ago

> Meanwhile, the world's container ship capacity will have increased by some large factor (30%, 50%) to address the shortage. Possible but I doubt it. Container ships take years to build, there are backorders, people ordering them make these forecasts, shipyards were hit by COVID as well, they require all those supplies in short supply right now to start building. I think the silicon fabs popping up all over the world are not because of the demand spikes necessarily but estimated demand growth, political motives (very few countries are comfortable with current situation of most top end fab capacity being located in Taiwan).

maxk42 5y ago
Actually, this is normal in the container shipping industry. Oversupply is the very likely result of this within 24 months. (Likely very much less.). Most of the oversupply typically comes from recycled ships and not new manufacturing. However, even during a downturn new manufacturing doesn't cease because container ships have a very short lifetime. New ships are sold typically in just a few years to smaller operations which in turn resell them again to smaller firms. At the end of their lifetimes, the ships inwill be owned by tiny (typically) East-Asian operators which will spend more time and money jury-rigging them to stay afloat than operating them under contract. The sea is not kind to steel. But when rates are high, even an old clunker can be run profitably, so these small operations with one or two rusting ships which are essentially lemons can continue operating them at a profit until rates dive again.

arisAlexis 5y ago

Covid did increase semiconductor market due to everyi going online and also other sectors like simple consumer electronics,cameras etc. This trend will probably not end. Humanity is going towards more tech every year.

reaperducer 5y ago

Meanwhile, the world's container ship capacity will have increased by some large factor (30%, 50%) to address the shortage. How long do you think it takes to build a container ship? It's in the area of three years in the best of times when you have a good supply of workers and raw materials and building capacity.

throw0101a 5y ago

> At some point those ships will clear out of LA and there will be no more pile up. All the goods will have been distributed. Meanwhile, the world's container ship capacity will have increased by some large factor (30%, 50%) to address the shortage. They'll be scrapped: * https://www.marineinsight.com/shipping-news/275-cargo-vessels-sold-for-scrap-in-h1-2021-40-rise-as-compared-to-2020-vesselsvalue/ https://www.marineinsight.com/shipping-news/275-cargo-vessel... * https://www.recyclingtoday.com/article/ship-recycling-steel-2021-bangladesh-india-pakistan/ https://www.recyclingtoday.com/article/ship-recycling-steel-... Or at least the oldest, smallest, least efficient ones will be.