Halfway down the train one container stood out with HUGE letters on the side:
I thought "uh oh."
Posted on 02/25/2020 12:30:35 PM PST by Rebelbase
Japanese carrier ONE has joined several of its liner peers in imposing a congestion surcharge on reefer containers destined for major Chinese ports.
Moreover, some carriers are preparing to declare force majeure and leave refrigerated containers at alternative ports.
With the coronavirus outbreak showing no signs of abating in China and still severely restricting landside operations at the ports of Shanghai, Ningbo and Xingang, reefer plug-in points are in extremely short supply, obliging carriers to discharge temperature-controlled boxes at other ports.
ONE has told customers it would apply a surcharge of $1,000 per reefer container, with immediate effect, “to cover additional costs related to the unexpected but necessary arrangement of shipments, and associated plug-in charges and monitoring fees”.
The carrier also said it may need to “adjust the original transport plan”, which could result “in the discharge of reefer containers at an alternative port without prior notice”.
ONE said it would endeavour to arrange relay of the reefer boxes to intended destinations, “subject to reefer plug availability”. However, it would be encouraging customers to consider a change of destination, “especially for time-sensitive cargo such as fresh, chilled commodities”.
Israeli carrier Zim and others have also announced immediate surcharges of $1,000, while CMA CGM will surcharge its customers $1,250 per reefer container. e,
MSC said it was invoking clause 19 of its bill of lading, which potentially gives it the right to leave goods at “any place or port which the carrier may deem safe and convenient”, and to receive full freight with any additional costs incurred for the shipper’s account.
The Loadstar understands that other carriers could follow MSC’s example if the crisis continues.
Meanwhile, insurers are bracing themselves for claims for spoiled contents in containers stuck on terminals in Asia for several weeks.
One marine cargo insurer source told The Loadstar he expected “an avalanche” of claims following the massive supply chain disruption resulting from the virus outbreak, and that, with the vast growth in reefer imports into China, potential claims “could be massive”.
“Unfortunately it is not just about plugging the boxes in,” he said. “A lot of the contents of reefer boxes have a shelf life and the goods will end up being destroyed and a total loss. We know from previous experience that claims can run into tens of thousands of dollars per single unit.”
Indeed, the Swedish Club agreed that damage to reefer container cargo was “both frequent and costly”, and because the cargo was intended for human consumption, “even minor changes in quality may cause authorities to order the complete destruction of the cargo”.
In a more optimistic note, CMA CGM said today that, “subject to further review”, it was planning to resume full operations at its network of offices in China from Monday 2 March.
Any Just In Time Inventory that is dependent on a global distribution stream is a recipe for disaster.
Halfway down the train one container stood out with HUGE letters on the side:
I thought "uh oh."
“Any Just In Time Inventory” is an oxymoron. There’s not supposed to be inventory, with JIT.
It can never be faster than the arrival of the last rivet on the factory floor.
Plus, of course, the time it takes to do all the assembly steps after the one that required that rivet...
It’s hard to figure out what’s going on from the article. Are shippers refusing to send their containers to Chinese ports? Are the Chinese ports short of workers and cannot unload the incoming containers?
Does this portend starvation in China?
The high cube and other types of container options were probably forgotten, but everyone remembered the reefer.
The reefer units, I would guess, mainly contain pork that they are importing from us. Chinas pigs have died off from another virus mandating they import more pork from us. Also they have had a bird flu virus killing off their chickens.
On top of this, for some reason, we send out chickens over there for processing into whatever. Be prepared to see slightly green chicken for sale at your nearest store.
That’s another big “oopsie” for China. I’d imagine President Trump will have a whole lot of leverage when negotiating with them (and a whole lot of risk because they will be desperate).
A central feature of a modern industrial society, especially one with a highly interconnected and geographically spread out supply chain with complex logistics, is that they are surprisingly difficult to restart once they break down.
Hope that does not happen here but we shall see. Lots of crazy stuff like producers shipping perishable frozen fish and poultry from the US to China to have it processed there and shipped back to the US for sale
Was really gobsmacked on many levels when I was informed of that one. Total irrational business case combined with reckless irresponsibility on the part of decision makers involved
This virus is really not that severe so far but the fallout is starting to hit home. Suspect it is going to expose some very bad management decisions with some harshly negative consequences - even with at this early juncture
The real fun starts when companies learn that their chinese job shops have been subcontracting to lower cost of production, fly by night producers in such garden spots as Cambodia, Burma, Laos or North Korea.
You know its bad when Vietnam is the gold standard of these lower tier subcontractors
A lot of these often very corrupt countries and sub contractors don't even have a functioning legal or law enforcement system in the best of times and property rights and contract enforcement is best described as law of the jungle.
That's assuming that the basic infrastructure like water, electricity and sanitation , a significant challenge and risk in the best of times, continues to function at adequate levels as this virus spreads. In these cases, force majeure clauses devolve to the entity with major force on the ground to resolve
When this passes the Chinese will need to purchase an epic amount of American agricultural products.
When that happens, the 2020 election is game, set, and match.
“...assuming that the basic infrastructure like water, electricity and sanitation...continues to function at adequate levels...”
Sanitation being the biggest worry.
Once these boxes lose power, the contents will rapidly spoil. Given sanitary food requirements and similar requirements for pharmaceutical components, these shipping containers will become pretty much total losses once spoilage occurs and require either scrapping or decontamination and total rebuild
Best to off load and either sell or distribute locally because otherwise you will have too off load and dispose of contents. Once the goods spoil the container is made totally unusable so if the contents are left to rot we will see a major shortage of shipping containers because the contaminated containers will need to be condemned
About as bad a public health threat for epidemics as you can get - maybe worse than the corona virus itself
I told you
DAVES NOT HERE!!!!
Whatever one thinks of the virus and any real health impact it may have, the economic impact is considerable and ongoing.
The trajectory is toward severe.
Transpacific shipping has been cut in half (-46%) this month. Pacific regional shipping is down ~60%. Demand for all commodities is down, to include oil.
After major floods here, the refrigerators and freezers are the nasty things to dispose of.
Trade with the Commies amounts to $500B. Even if ALL trade stopped that is only $500B/$22,000B = 2.2% of GDP. Losing 2.2GDP would hurt but that would be ALL trade with the Chinks stopped which is highly unlikely.
It will be a demand shock, followed by a supply shock and it is not limited to China.
It’s worldwide. And the trajectory is not good.
Check on what proportion of the US economy is dependent upon trade. That’s the principal at risk, not just China trade.
Much of this is due to quarantine mandates. Our leaders need to develop a more rational quarantine/screening procedure that restarts the normal flow of products to the greatest extent possible without spreading the disease to keep the system from breaking down.
The strict quarantine is not a rational response as cargo is probably not a high risk transmission vector
This needs to occur before ships start off loading distressed cargo in large quantities which is imminent. If we do not deal with issue it may become the 21century version of Smoot - Hawley debacle Helped convert the 1929 Stock Market crash into the Great Depression. Nobody really fully understands how our massively interconnected world economy with its transnational trade and manufacturing system works and what the total impact of massive disruptions could look like. No wanting to be a hysteric, but the downside risks are potentially very severe
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.