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'It's All Happening Again.' The Supply Chain Is Under Strain
- toomuchtodo 2y agohttps://archive.today/wWWI1 https://archive.today/wWWI1
- steve_gh 2y agoIf it becomes that lucrative to ship containers new entrants will join the market at better rates
- advisedwang 2y agoIt's not that simple. For one thing, lead times are long and costs are high so there is a huge risk that your capital will be wasted if costs come down before projects are complete. Secondly not all the bottlenecks can simply have a new entrant. For example, the article cites panama canal constraints as a factor. Launching a competitor to the panama canal requires more than just time and money, it requires political and geographic opportunities.
- retzkek 2y ago> Launching a competitor to the panama canal requires more than just time and money, it requires political and geographic opportunities. Mexico is well on the way with their competitor: https://en.wikipedia.org/wiki/Interoceanic_Corridor_of_the_Isthmus_of_Tehuantepec https://en.wikipedia.org/wiki/Interoceanic_Corridor_of_the_I...
- willyt 2y agoThe new entrants just need to order a few 150,000 tonne container ships from Korea, these should be ready in a few years then they'll be good to go, as long as the incumbents don't sneakily cut prices just as their new ships are ready, they should be golden...
- LeChuck 2y agoYou are being downvoted but you're right. New entrants are joining the market. Problem is, these are usually smaller local players who don't have enough capacity to have any influence on rates. https://theloadstar.com/ellerman-city-liner-relaunches-china-uk-service-for-peak-season/ https://theloadstar.com/ellerman-city-liner-relaunches-china...
- jncfhnb 2y agoThe geopolitical calculus here seems a bit hard to follow. Surely China suffers disproportionately from more difficult export traffic to the point that it should be incentivized to tell Iran to tell the Houthis to cut it out
- bee_rider 2y agoThe article is paywalled, so I don’t know if they elaborate more on this; I’m just responding to your comment. I’m pretty sure these countries aren’t beloved allies of each other, right? China presumably could politely ask Iran, who’d have to weigh their priorities, and the Houthis might just keep launching rockets anyway, they aren’t exactly a branch of Iran’s military or anything.
- jimbokun 2y agoNone of the groups projecting Iran's interests in the region are a branch of Iran's military or anything. Not the Houthis. Not Hezbollah. Not Hamas. It works better for Iran that way.
- rasz 2y agoYes, Houthis might just ignore them and keep shooting <checks notes> Iranian made rockets delivered to them by Iran.
- lolinder 2y agoWhat makes you think that China has much sway over Iran? The world isn't divided into the countries that are under American hegemony and the countries that are under Chinese hegemony. It's more that there are the countries under American hegemony, the countries on mostly-friendly terms with the Americans but able to say no to them, and the small number of countries that are entirely cut off by the USA. This last group tends to not want to just trade one hegemon for another, they try their best to become self-sufficient and able to say no to everyone. Iran is very much in that category: just because they're on friendlier terms with China than with the USA doesn't make them beholden to them.
- lolinder 2y ago> Then, a severe drought in Central America dropped water levels in the Panama Canal, forcing authorities to limit the number of ships passing through that crucial conduit for international trade. This was surprising to me, as I'd always kind of assumed that the Panama canal would use ocean water for the locks. It turns out that the locks don't pump water at all, they just use gravity, necessitating reservoirs of fresh water. See a longer discussion here: https://news.ycombinator.com/item?id=37055679 https://news.ycombinator.com/item?id=37055679
- HarHarVeryFunny 2y agoWhy would gravity require a water supply other than what's already in the canal? o To go up you sail in, close the gate behind you, and let water into the lock from the higher level until you can open that gate and sail out o To go down you sail in, close the gate behind you, and let water out until it has dropped to the lower level and you can open that gate and sail out At, least, this is how normal canals/locks work. What's special about the Panana canal ?
- superluserdo 2y agoBoth situations involve a huge amount of water flowing downstream. That needs to be replenished either through rainfall or through pumping.
- AnimalMuppet 2y agoI think you're missing that, when you go down, the water flows out into the lower level waterway, not into a holding tank. It therefore cannot be re-used to raise the level in the same lock again. Water goes from the upper level to the lower level only. So you need a supply of water at the upper level.
- bobthepanda 2y agoalso, the lakes in the middle are freshwater, so pumping water back in from the sea would destroy the lake's ecosystem and any sort of supply hooked up to it expecting fresh water, which is not in the interest of the Panamanians.
- goodgoblin 2y agoIsn't this exactly what Peter Zeihan said was going to happen? I think it is.
- apothegm 2y agoAt what point does the risk added by using just-in-time inventory methods override the savings?
- geodel 2y agoWhen MBA schools revise their curriculum.
- jankyxenon 2y agoJust in time works until it doesn't. For the last decade plus companies made outsized profit by squeezing their supply chains to the bare minimum. Then covid hit and it all fell apart. Companies that had resilient supply chains made outsized profit during this time. Companies are all about making bets on where they make more money. If you were in the hot seat to maximize quarterly profits would you make the first or second bet?
- nine_zeros 2y ago> When MBA schools revise their curriculum. I chuckle because there is some truth to it. A real business survives by understanding the ground reality. MBA/spreadsheet business survives by trying to maximize shareholder value (often by mindlessly cutting costs) until it implodes on itself.
- bee_rider 2y agoThe market optimizes for efficiency, not robustness, right? Every engineer knows redundancy is the easiest way to add robustness (there may be better ways, but redundancy doesn’t require much cleverness). Every economist knows redundancy means you are about to be fired.
- kukkukb 2y agoThere's a very fine line between Just In Time and Just Too Late. We advocate for Just In Case inventory, which is much more resilient.
- apothegm 2y ago
- RyanAdamas 2y ago[flagged]
- wing-_-nuts 2y agoWho cares what they call themselves. They're shooting missiles at civilian shipping traffic. They're terrorists and deserve to be wiped off the map.
- password54321 2y ago>They're shooting missiles at civilian shipping traffic. Nice try. This is one of those statements while 'technically true', intentionally leaves out a ton of important context.
- wing-_-nuts 2y agoYes, please, go ahead and give me the 'context' that justifies attacking innocent civilians.
- password54321 2y ago[flagged]
- wing-_-nuts 2y ago[flagged]
- RyanAdamas 2y agoReally? Which group did that land belong too before it was occupied by semitic pretenders?
- wing-_-nuts 2y agoI think both groups have claims dating back thousands of years. Serious question. How do you think this ends? Israel has a massively strong military. They're not going anywhere. Any hope of peace revolves around a two state solution or at least an autonomous region. The only way that will ever happen is with the good will of the Israeli people. I don't see any good faith attempts at resolving this from the other side. I see terrorist attacks and bombings. Yeah. Tell us how that's working out for you as every building you own is leveled to dust. Surely thoughts and prayers from abroad will solve it.
- resource_waste 2y agoGuess I should wait to sell my investments. Inflation is only bad if you don't have debt.
- emmet 2y agoI can't cope with it anymore. I work in grocery and we're seeing weeks long waits for containers and shipping dates, coupled with items arriving with the minimum allowed life, leaves us with very short turnaround frames. It's no wonder people can't keep the shelves stocked. Getting out of SC as soon as I possibly can.
- dukeofdoom 2y agoFree flow of container shipping traffic is what globalism is. Salmon caught in US processed in China and shipped back to US. Is only possible because of how cheap shipping costs are.
- deleted 2y ago[deleted]
- advisedwang 2y agoThis is sadly an inevitable consequence of a market after growth-through-innovation as ended. Competitive pressure and the need to extract profit means every millimeter of slack in the system is used or eliminated. As this happens, the system becomes more and more fragile. And when the system has crises, they do not spur some kind of extra capacity or sane response to the crisis. Instead you get consolidation, gouging and further crisis. This is especially true, and especially hard to remediate, in a highly international market where regulation cannot effectively be imposed.
- jimbokun 2y ago> And when the system has crises, they do not spur some kind of extra capacity or sane response to the crisis. Do you have evidence for this? Or does it just take time for extra capacity come online? Otherwise, is this a new phenomenon? Then what changed? It's certainly not the case that capacity for desired goods never increases. That would be absurd.
- the_snooze 2y agoIt takes time for extra capacity to come online. We saw it quite clearly when the Ukraine war started: western allies want to help Ukraine, and Ukraine desperately needs artillery shells, but the facilities to build those were scaled back to produce at peacetime rates (i.e., not much) in the name of efficiency and cost-cutting. Rebuilding and restaffing new factories isn't something that happens overnight, because those rely on a broader supply chain for component parts and personnel. https://apnews.com/article/us-army-ukraine-russia-ammunition-war-75a9ca2e3be09578c65f1198ba5b72e5 https://apnews.com/article/us-army-ukraine-russia-ammunition...
- jrs235 2y agoEfficiency reduces resiliency.
- bee_rider 2y agoRedundancy: engineers love it, managers hates it
- bjt 2y agoFactors that I see from the article that are driving up shopping costs/delays: 1. Unexpected problems in key canals. (Houthi attacks on the Suez route and drought on the Panama route.) 2. Possibly some market manipulation by carriers. (The article gestures in this direction but doesn't actually claim collusion to fix prices.) 3. Demand is really high. This drives the congestion in key ports that the article mentioned. The article text doesn't emphasize factor 3 much, but the subtext of that is everywhere. And that's actually a good thing. Lots of things being shipped means lots of economic activity means lots of jobs etc etc. tl;dr The world is complicated and sometimes multiple factors combine to make things like this flare up. My bet: We are going to be fine. The actors in this system will adapt, especially from price signals. Supply of shipping will go up a bit, demand will go down a bit, people will find alternate routes/ports/methods for getting their goods where they want them.
- tomohawk 2y agoJust a taste of what's to come as the US exits the global commitments to ensuring freedom of navigation it has policed since WWII. Before the US, it was the UK. The UK ended the widespread piracy and slave trade during their tenure. One wonders what the CCP will do. So far, it doesn't look promising, if the South China Sea is an example.
- AtlasBarfed 2y agoThese microcrises are all to be expected. Globalization is coming to an end. As China and Russia become more militant, and the US becomes more insular, pax americana's guarantees of freedom of the seas will wane. Perhaps not to the degree that people like zeihan think it will, but this is an example. Will know if the US decides to bomb the houthi rebels into Oblivion which is what would have happened about two decades ago. The main reason behind this is because petrol shipping was the prime reason underlying globalization and free seas. But with the bakken shale the US is oil independent, and it can defend whatever exports shipments it wants. Also, solar wind and EVs are the harbinger the end of the oil age. Yes, we'll still use petroleum but the demand will greatly diminish, to the point that it is no longer a primary concern of US foreign policy and military strategic policy.
- shiroiushi 2y agoI'm surprised Egypt hasn't taken military action: they own the Suez Canal, so the Houthi actions are greatly harming their revenues from that.
- cjbgkagh 2y agoEgypt is facing a ton of pressure from the Muslim population to act against Israel, not fighting the Houthi's on this, while expensive, is still cheaper than doing anything directly.
- mikewarot 2y agoWhen Russia invaded Ukraine in 2022, we found out their Army was mostly a paper tiger. It seems the Houthi are showing that our Navy is about the same... lots of money and technology invested into systems that aren't up to the challenges of the 21st Century. I just hope we can replace enough of the machine tools industry here at home in time to avoid catastrophe when globalism collapses. It's really going to suck when the dollar stops being our primary export. We're going to suffer the same fate as Britain after the loss the Pound Sterling as the international reserve currency.