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Why billions of dollars of goods are stuck at sea

economist.com

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Re: Why billions of dollars of goods are stuck at sea

#41

Post by rolltack »

slv77 wrote: post #16

This bankruptcy means that companies shipping goods are no longer going to be able to treat shipping as a fungible commodity and instead are going to have to price in a risk component as well. That suggests that the largest and best financed players are likely to be able to command a premium which will accelerate losses at smaller players. This would increase the spreads further and create a viscous loop. Does anybod…

This is an overly sensational piece. It might slow things down for a few people temporarily, but there's no way this is making retailers worried about sales this Christmas.

In response to slv77:

The bankruptcy means (1) demand has substantially decreased for shipping services, or (2) large established shipping companies are not lean enough to survive and losing market share.

In no way could this accelerate losses for 'small players'. In fact, this should grow their business. I also have no idea what this vicious loop is you are talking about.

Shipping costs may go up slightly, but it will likely already be priced into current the market.

I think this is not as big of a deal as the article is making it out to be.

Re: Why billions of dollars of goods are stuck at sea

#42

Post by yourapostasy »

Animats wrote: post #32
shambala wrote: post #21

Earlier quoted context omitted.

They will just buy insurance, and the insurance companies will figure it out.

Insurance against late delivery is available but very expensive. Ordinary marine insurance does not cover this. The cargo isn't lost, just late.

How does insurance treat the use case where creditors seize the cargo and liquidate it to pay themselves back?

Re: Why billions of dollars of goods are stuck at sea

#44

Post by vegabook »

ThrustVectoring wrote: post #23

Low interest rates definitely explains part of it. The one-year treasury bond rate is at 0.6%, which means that unloading the goods now instead of next year is worth only $87M if you assume no losses from business disruption.

nitpick -> I see 0.006 * 14.5bn as 87m? Or am I doing something wrong? Also you have to factor in that a large proportion of the goods might have sizable negative time value, especially if they're perishable, but also if there is any (highly likely) proportion of obsoletable tech in there. Perhaps that's what you mean by business disruption?

Re: Why billions of dollars of goods are stuck at sea

#45

Post by robrenaud »

yourapostasy wrote: post #42
Animats wrote: post #32

Earlier quoted context omitted.

Insurance against late delivery is available but very expensive. Ordinary marine insurance does not cover this. The cargo isn't lost, just late.

How does insurance treat the use case where creditors seize the cargo and liquidate it to pay themselves back?

How does that work? Presumably the shipping company doesn't own the cargo.

Re: Why billions of dollars of goods are stuck at sea

#46

Post by [deleted] »

ars wrote: post #28
erikpukinskis wrote: post #6

This seems like a really good sign. We can only hope global shipping continues to shrink until we can get down to a level of consumer purchasing that is sustainable for the ecology of the planet.

It's quite the opposite. The less money people have the less they care about the environment. That's why as quality of life went up in Western countries the environment became more and more important to people, to the point that it's almost an obsession for some people now.

[deleted]

Re: Why billions of dollars of goods are stuck at sea

#47

Post by mhurron »

namdnay wrote: post #38
jfoutz wrote: post #13

Earlier quoted context omitted.

That's one way of looking at it. Of course, the more expensive shipping is, the less likely it is to ship inexpensive items, like food.

Wouldn't it do more to encourage local food production and consumption? Thus reducing pollution while at the same time boosting farm economies in poorer countries which were previously flooded by lower-cost imports from richer highly efficient food-producing countries?

And leading us back to a time of poor nutrition for large parts of the world that currently rely on shipping to bring fresh and varied food.

Re: Why billions of dollars of goods are stuck at sea

#48

Post by gumby »

shambala wrote: post #21
slv77 wrote: post #16

This bankruptcy means that companies shipping goods are no longer going to be able to treat shipping as a fungible commodity and instead are going to have to price in a risk component as well. That suggests that the largest and best financed players are likely to be able to command a premium which will accelerate losses at smaller players. This would increase the spreads further and create a viscous loop. Does anybod…

They will just buy insurance, and the insurance companies will figure it out.

> They will just buy insurance, and the insurance companies will figure it out.

It's not that simple.

Yes, premiums will adjust depending on the finances of the carrier but the cost of insuring the risk itself is quite variable and can be ruinous. The value of a delayed shipment of iPads is much higher than a delayed shipment of board games, yet Apple can tolerate the former while the latter could sink a company. The board game company might not be able to afford to insure the risk, even though the premium could be lower.

The fact is an Apple can manage the risk by spreading the load (they already do it multi modally, and probably already do it for ships too). A small company with one container or less of goods, cannot.

Re: Why billions of dollars of goods are stuck at sea

#49

Post by namdnay »

mhurron wrote: post #47
namdnay wrote: post #38

Earlier quoted context omitted.

Wouldn't it do more to encourage local food production and consumption? Thus reducing pollution while at the same time boosting farm economies in poorer countries which were previously flooded by lower-cost imports from richer highly efficient food-producing countries?

And leading us back to a time of poor nutrition for large parts of the world that currently rely on shipping to bring fresh and varied food.

Which parts of the world would those be? From what I've read the problem is often the opposite - cheap grain imports from the USA destroying agricultural economies in Africa for example.

I really don't think there are large parts of the world that would not be viable through local agriculture.

Obviously, there will be islands etc for whom this isn't viable, but I doubt they were getting food by massive ships anyway.

Re: Why billions of dollars of goods are stuck at sea

#50

Post by mhurron »

namdnay wrote: post #49
mhurron wrote: post #47

Earlier quoted context omitted.

And leading us back to a time of poor nutrition for large parts of the world that currently rely on shipping to bring fresh and varied food.

Which parts of the world would those be? From what I've read the problem is often the opposite - cheap grain imports from the USA destroying agricultural economies in Africa for example. I really don't think there are large parts of the world that would not be viable through local agriculture. Obviously, there will be islands etc for whom this isn't viable, but I doubt they were getting food by massive ships anyway.

Most of the northern hemisphere. You know, all those places where nothing grows for 6 months out of the year where prior to shipping food we had to rely on canned and preserved foods.
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