Isnt a big piece of higher shipping costs the part where ships are waiting days, if not weeks, to get into port?
Hopefully at some point someone starts to try to solve problems, instead of just point fingers.
2 Likes
Itâs a lot of things - the port congestion, the environmental regulatory uncertainty on what fuels or mitigation measures might be required in a few years for all ships (leading to few new ships built until thatâs clear, lest you have to pay millions to refit the engines for whatever âgreenerâ fuel might be required), expensive port labor monopolies, closing of several large shipyards due to the last economic downturn so building capacity is limited, some aspects of specific trade routes like if the US isnât exporting much to China now compared to previously you canât offset the return trip back to China with some paying cargo, etc.
2 Likes
and now you can add bad flight plans and canceled flights due to lack of access to Russian airspace to your supply chain woes.
1 Like
Assuming this data is correct, the difference in average operating margin is eye-popping though. From 3.7% to 56% doesnât seem to me to be all due to port congestion.
Iâm not sure thatâs as simple as that. You cannot simply ship stuff elsewhere if there is not enough demand for it. Besides, if we force them down, others are likely to follow suit asking why they should pay more than we do.
But I agree that priority should be to work on the things we can solve ourselves like congestion at our ports which is significantly worse than anywhere else in the world.
in shipping, there are years when your operating margins are more like -50%. Having the politicians try to cap the good years just means no one new will buy ships because the volatility is too high. Already most ships are financed, ala a mortgage, with around 70% debt, so it doesnât take much of a move in shipping rates to swing a leveraged bet on rates from very positive to very negative given your interest rate costs (and much of your operating costs) are fixed.
Meanwhile, Sen. Warrenâs lackey telling us how the free market is supposed to work as oil prices break to new highsâŚ
*RAMAMURTI WARNS OIL, GAS COS. NOT TO RAISE PRICES ON CONSUMERS
Heâs telling them they should take a loss, since after all, the oil prices are up nearly 10% just today and someone should tell him the oil goes into making gasoline.
*WTI Oil Prices Top $104, Jumping 9.1% to 7-Year-High $104.44
OIL FUTURES EXTEND GAINS, U.S. CRUDE UP $9 A BARREL
But midterms are coming, so lets blow our strategic Democratic Re-election Reserve in the midst of a geopolitical crisis
IEA MEMBERS AGREED TO RELEASE A TOTAL OF 60 MILLION BARRELS OF OIL FROM RESERVES INTO GLOBAL MARKETS - JAPAN INDUSTRY MINISTER
UNITED STATES WILL RELEASE 30 MLN BARRELS OF OIL OUT OF THOSE 60 MLN BARRELS
1 Like
Iâm not convinced. This does not look like you have that wild swings in operating margins routinely. Sure +/- 15% happens but when was the last time they operated at -50%?
From your first link
Various analyses underlined an overall operating loss in 2009 of more than USD 20 billion (American Shipper). The industry average in terms of operating margin fluctuated between -17% and -19% in the first three quarters of 2009. The poor financial situation of many carriers led to an array of bail-out and debt restructuring programs.
Bankruptcy and equity wipeouts happened then. -50% wasnât on average, but those that did failed, or sold all their ships for scrap and tried to repay most of their creditors. Hereâs the 10 year chart for two of the survivors in container shippingâŚ
Flat for a decade, and you want to squeeze them even more? Theyâll just stop buying ships and you wonât get anything if you donât pay up, which is essentially what happened.
When thereâs a shortage of capacity, they can pick the most profitable cargos / routes, and if the US caps what US customers are allowed to pay we just wonât get supplies. They can prioritize other routes if weâre being cheap, or deliver them very slowly so you have to pay for more days (rates are day rates, not per trip), etc.
2 Likes
Many pension plans for government employees were already underwater with high promised benefits and unrealistic investment return expectations. The problem is even worse now.
Rising inflation is driving up expenses for many large U.S. pension funds that have promised retirees cost-of-living raises.
About half of states link pension benefits for some or all of their retired workers to changes in the consumer-price index, according to the National Association of State Retirement Administrators. With inflation reaching 7% in December, some retirement funds are now looking at increasing pension checks by 3% or more for the first time in a decade. At others, board members or state officials are approving one-time cost-of-living raises.
âItâs a hot topic,â said Keith Brainard, the associationâs research director. âA cost-of-living adjustment can be an expensive plan provision.â
Pension funds are confronting a challenge shared by institutions and household savers alike: Just as expectations for public market investment returns are dimming, everyday costs are going up. This year, many retirement systems will book a loss on cost-of-living adjustments, rather than the annual windfall they have been seeing for years when those inflation-linked increases came in below expectations.
2 Likes
*DEMOCRAT OFFERS LEGISLATION TO STOP RUSSIAN OIL IMPORTS
Why do the democrats want the poor people to pay so much for gas? I thought they cared about the little guy, but I guess they hate Putin more and need to make a show of it. Meanwhile,
RUSSIAN URALS OIL OFFERED AT NEW RECORD DISCOUNT IN EUROPE
*Urals Grade Russian Oil Quoted at $15 a Barrel Discount to Brent, Sources Say â WSJ
*Buyers in Self-Imposed Embargo on Russian Oil Despite Sanction Exemption by West, Sources Say â WSJ
U.S. NATURAL GAS PRICES EXTEND GAINS, FUTURES UP 5%
Fedâs take as oil and natural gas prices are up +5-10% more today
- FEDâS EVANS: INFLATION IS EXTREMELY HIGH; THAT NEEDS TO BE ADDRESSED BY MONETARY POLICY FOR SURE
- FEDâS EVANS: WILL HAVE TO ADJUST MONETARY POLICY TO DEAL WITH HIGH PRICES
- FEDâS EVANS: INFLATION IS âQUITE A RISKâ TO ECONOMIC GROWTH
- FEDâS EVANS: AS FED RAISES RATES, IF INFLATION DETERIORATES WE CAN INCREASE RATES MORE QUICKLY
- FEDâS EVANS: EVEN NEXT YEAR INFLATION WILL BE DOWN BUT STILL CLOSER TO 2.5% THAN 2%; WILL TAKE UNTIL 2024 TO GET TO 2%
Heâs very likely to be right on that. After all, 5% is closer to 2.5% than 2%âŚ
1 Like
Commodities, and a nice chart on the very high correlation between gasoline prices and oil prices. But surely any one who raises gas prices on customers in the face of a decade record high oil prices is some gouging profiteer who needs a visit from the new DOJ investigator.
Oil hit $112.5/barrel today and some experts are calling for $150-200. Oil is now at an 11-year high. The first chart shows the move in oil. The second chart compares oil (blue line) and gasoline (orange line), and as you can see, the correlation coefficient is high. The link is interactive, and you can click on it to see the exact price of oil and gas. US gas prices average $3.66/gallon relative to $2.73/gallon one year ago. The all-time high was $4.11/gallon in July of 2008. Higher gas is a regressive tax and fear it can go decently higher. Aluminum and wheat have rallied sharply as well as natural gas and coal. Wheat traded âlimit upâ today and was the highest in 14 years. European natural gas surged as much as 60% at one point to an all-time high on Wednesday. Remember, Europe gets over 40% of its natural gas from Russia. This morning, CNBC reported that US oil consumption is approaching 21mm barrels/day. This is up from what I had seen which was in the 19mm/barrels range. Again, the US should be energy independent and not reliant on Russia or anyone else for oil. This CNBC interview today suggested that there is a minimum of a two million barrel a day shortfall if Russia is unable to sell its oil into the market. A shortfall of 25% of that would have a massive impact on oil prices. In the past year, oil is +100%, natural gas is 90%, corn+49%, wheat+62%, beef+15%, lean hogs +35%, aluminum is +69%, gasoline +31%.
2 Likes
Powell: What, Me worry?
This is from the Wall Street Journal. Clearly Powell is not panicking over inflation:
Federal Reserve Chairman Jerome Powell said he would propose a quarter-percentage point rate increase at the central bankâs meeting in two weeks amid high inflation, strong economic demand and a tight labor market, offering an unusually explicit preview of anticipated policy action.
Mr. Powell said Wednesday that, before Russiaâs invasion of Ukraine last week, he expected the central bank would follow that initial rate rise with a series of increases this year.
âFor now, I would say that we will proceed carefully along the lines of that plan,â Mr. Powell told the House Financial Services Committee on Wednesday. âWeâre going to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain moment.â
While it was too soon to say how the war and heavy sanctions imposed by the West against Moscow would influence the U.S. economy, he revealed general urgency to continue tightening policy.
2 Likes
Continue? If itâs that urgent, why only 25 bips now?
2 Likes
Stop trying to make sense of what heâs saying!
They were ready to do a 50 bps rate hike, then Russia invades Ukraine and crude/NG prices jump which are bound to further increase inflationary pressure. Response from Fed: Not so fast⌠letâs slow down the potential curbs on inflation. Did Erdogan take over the Fed?
6 Likes
Yes, itâs a head-scratcher. I guess Glitch or Xerty alluded to it earlier - when did the Fed give as much importance to a rising stock market as to an even-keeled economy.
Oil at record highs, and we get this?
*BIDEN: U.S. UNIQUELY WELL POSITIONED TO DEAL WITH INFLATION
*GOLDMAN SACHS: OIL MARKETS HAVE âNO BUFFERâ FOR HIGH PRICES
https://finviz.com/futures_charts.ashx?t=CL&p=d1
I guess the US is uniquely rich enough to pay through the nose for everything? Or maybe he hopes that selling out global nuclear security with some sweetheart Iran deal to get their oil back into the public markets will help a little on the inflation front?
3 Likes
Yes weâre rich enough. But give Biden enough time and weâll see how far âdown the drainâ he can take us.
Makes me sick to see how One Man can make so many errors. Imagine, POTUS cannot see whatâs happening. Or maybe 
others are making these decisions.
Remember âIâm going to get in troubleâ as He rushes away from talking to the people. Very troubling⌠Survival for 3 more years?
3 Likes
Headline say it all. $115/barrel, do I hear $125? $150?
Food prices moving up with the surge in grain / wheat due to the Ukraine war.
3 Likes