Articles in Category: Logistics

metalworking

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Before we head into the penultimate weekend of 2020, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner, including: research findings related to organic molecules’ impact on machinability; gold prices; and the arrival of an allocation market for steel-buying organizations, as explained by MetalMiner CEO Lisa Reisman:

Week of Dec. 14-18 (machinability, gold prices and steel allocation market)

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Shipping

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The shortage of containers in Asia, which we reported in detail last month, has been ongoing, as has the continuation of port congestion across the U.K. and Northern Europe.

Combined, these problems are having a profound impact on sea freight services.

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Shipping lines navigate choppy waters

A number of shipping lines are suspending all freight bookings from Asia to Europe until the end of the month.

Heavy and sustained demand has overwhelmed the container supply chain, creating chronic shortages in equipment and driving rates up. Further increases are likely in January.

So far this year, sea freight rates have doubled on the Asia to European routes, an unprecedented rise that has caught importers off guard as they have incurred some substantial losses just as businesses are struggling to recover from or meet the ongoing demands of the COVID-19 pandemic.

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merger and acquisition

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner, including Tata Steel and its attempt to spin off its European assets, the U.S.’s rising steel capacity utilization rate, China’s economic recovery and its impact on metals prices, and much more:

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Week of Nov. 16-20 (Tata Steel looks for buyers, capacity utilization rises and more)

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The disconnect in recovery between Asia and North America/Europe is having an unprecedented impact on the transpacific and Asia-Europe container markets.

The world’s shipping industry had a near-death experience in the early part of the year as China went into lockdown.

To its credit and to consumers’ detriment, the industry has since got a grip of the situation and turned disaster into triumph.

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Container markets see rising rates

Ocean carriers are charging skyrocketing rates. In a bid to maximize returns, they are exacerbating shippers’ woes. Carriers have been shipping empty containers back from destination markets to origin rather than carrying cargoes.

The problem, as laid out by The Load Star, is a shortage of containers rather than space on container ships. That shortage is the main driver of the unrelenting spike in freight rates.

But the situation is made worse by carriers actively working to reposition their empty equipment as quickly as possible back to Asia to take advantage of skyrocketing spot rates. Meanwhile, they do not get those rates on the U.S.-Asia direction.

Exporters scrambling

This has left exporters around the world scrambling for boxes.

Indeed, one U.K.-based carrier executive reportedly admits, “We would much rather stick the empties back on the ship to Asia where we can use them straight away with premium-rate cargo than have them tied up for weeks on an export load from Europe.”

The same predicament pertains to the U.S.-Asia Pacific route.

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The widely, if not universally, held belief that globalization is a win-win panacea for growth has never looked shakier.

While President Donald Trump has led the charge on calling out the failings of unfettered engagement with China and all that entails in terms of loss of manufacturing capability and sharing of hard-won technology, he is by no means alone.

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Globalization and China

There is a growing groundswell of opinion that the long-held liberal beliefs that engagement would change China’s behavior have proved flawed.

China today is arguably more centrist, more actively and belligerently nationalistic and worryingly less influenced by world opinion than it has been for decades.

And yet it has, from an economic point of view, proved remarkably successful so far.

China’s economy has bounced back faster than those in the West. Furthermore, its economy has recovered faster than even its close Asian neighbors. That is because, in part, the party’s control meant it could enforce harsh — compared to in the U.S. or Europe — lockdown measures in the face of the pandemic. That enforcement extends to continued adherence to social distancing and hygiene standards since.

It is unlikely that a change of president in January, were that to happen following the November election, would have a meaningful impact on U.S.-China relations. A Biden presidency may try to foster a more collaborative international approach. However, the direction would likely be similar.

Europe, too, is following a less bellicose but similar path.

Europe’s investments in China and reliance on China as a trading partner are greater than that of the U.S., for whom China trade still represents a modest percentage of GDP.

Yet, even in Europe, there is increasing talk of decoupling supply chains and restrictions of technology transfers to China. Furthermore, these is talk of restricting Chinese technology companies’ access to the European market.

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Shipping

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We have written in previous posts about volatility this year in the logistics market adding to buyers’ delivery and import cost uncertainty.

At other times, we have also written about the decoupling of U.S.-China trade or supply chains.

Events in recent months, however, suggest the two combined are likely to continue to create significant cost and uncertainty for buyers through the balance of this year — and likely well into 2021.

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The U.S.-China trade relationship and rising import costs

Firstly, the aforementioned decoupling is just not happening.

A fair part of the current pressure on shipping space and costs is coming from increases in trade between Asia and the U.S.

The pandemic has spurred demand for Chinese-made goods from electricals like laptops and associated electronics to PPE equipment, including masks and gloves.

China now accounts for more than 85% of all U.S. imports in the category dominated by N-95 respirators, disposable and non-disposable face masks, surgical drapes and surgical towels, according to Forbes. The U.S.’s imports of those products have surged to multiples of previous years’ demand.

From disaster to boon

Secondly, the normal run-up to the Christmas period is hitting a brick wall.

Shipping lines are removing sailings. Initially, the measure constituted a coping mechanism during spring lockdowns. However, since then, as the success in raising freight rates became apparent, the measure became a blatant move to improve profitability.

The pandemic has evolved rapidly from being a disaster for the major shipping lines to becoming a boon.

The disruption has caused considerable challenges, including:

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As a followup from a piece we posted last month about container logistics in the current pandemic environment, we thought an update may be appropriate.

In that vein, the dynamics at play in global supply chains remain highly volatile.

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Shipping

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Shipping lines were thrown into chaos by coronavirus lockdowns — first in Asia, then Europe and finally in the U.S. Read more

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The shipping industry’s woes started before the current pandemic.

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Let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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