Posted on 12/06/2022 7:53:28 PM PST by SeekAndFind
There’s a headline.
Manufacturing orders from China down 40% in unrelenting demand collapse
Shipping companies are already reacting with “blank” (canceled) sailings and reallocating cargo shipments (“vessel utilization”) to make sure they have full boats before they pull out of port. All this is raising hell with the logistic delivery schedules people waiting on the other side of the pond depend on.
…Carriers have been executing on an active capacity management strategy by announcing more blank sailings and suspending services to balance supply with demand. “The unrelenting decline in container freight rates from Asia, caused by a collapse in demand, is compelling ocean carriers to blank more sailings than ever before as vessel utilization hits new lows,” said Joe Monaghan, CEO of Worldwide Logistics Group.
U.S. manufacturing orders in China are down 40 percent, according to the latest CNBC Supply Chain Heat Map data. As a result of the decrease in orders, Worldwide Logistics tells CNBC it is expecting Chinese factories to shut down two weeks earlier than usual for the Chinese Lunar New Year — Chinese New Year’s Eve falls on Jan. 21 next year. The seven days after the holiday are considered a national holiday.
The shipping industry is feeling the bite as it spooled up with new ships coming online to address the pandemic shipping boom, just as that very business now falls precipitously away.
…″It seems to be a very bad time for the shipping industry. We have the combination of declining demands and overcapacity as new tonnage enters the market,” it wrote.
But what the collapse in demand signals for the larger picture is more the worrying aspect.
…Blank (canceled) sailings data shows the cut in vessel capacity on the transpacific route (China to the U.S.) continues at a significant pace. The 2M Alliance of Maersk and MSC has suspended almost half of its U.S. West Coast services for December. The Ocean Alliance (CMA CGM, Cosco Shipping, OOCL and Evergreen) and THE Alliance (Ocean Network Express, Hapag-Lloyd, HMM and Yang Ming Line) have cut overall vessel capacity by 40-50% up to Chinese New Year.
As a result, space for shippers is considered tight for cargo bound for the Pacific Southwest route and service reliability has declined, with carriers including MSC and Hapag-Lloyd rolling (not accepting) cargo on sailings in an effort to make up time. According to logistics managers, this is creating two weeks of delay. MSC said in its latest notice to clients, “ETAs are indicative and subject to change without prior notice.”
Supposedly some of it can be attributed to Chinese COVID restrictions – orders aren’t being placed because of the uncertainty – but the truth of the collapse in orders is that the U,S. economy is on very fragile ground at the moment, and that has greater implications for the world’s economy at large. As much as they hate us, as the old kids’ song says, we are the head bone they are all connected to. Steve Van Metre of Markets Insider Pro points out:
“…out of the U.S., demands for foreign-produced goods, particularly out of China, are dropping so much that it’s impacting the shipping industry, it’s impacting jobs in China. It’s having a massive impact. And that’s telling us what’s going on in the global economy right now – that demand is falling on its face.”
While U.S. firms like Apple are finally in the process of shifting some or all of their manufacturing out of China, none of that alleviates the present woes. Business friendly alternative countries such as Vietnam have been a favorite of manufacturers in the past few years…
…Some U.S. companies have signaled plans to shift away from China. Apple is planning to pivot some production elsewhere in Asia, such as India and Vietnam, the Wall Street Journal reported on Saturday.
…but even the Vietnamese have been impacted by the general collapse in orders from both the States and Europe. And are now plagued by the same difficulties in moving shipments out.
…The drop in manufacturing orders from the U.S. and the E.U. is also impacting Vietnam, which has been booming as a manufacturing hub as more trade moved away from China.
Since early this year, 12,500 companies were closed per month, a 24.8% increase year over year, according to the Vietnam General Statistics Office report. The combination of the lack of manufacturing orders and loan interest rates increasing from 6.5% to 13.2% in Vietnam led many companies to close factories instead of signing new order contracts, according to HLS. Canceled ocean sailings bound for Vietnam are up 50% for December.
Looking back, the WTO was sounding very bearish in its October forecast.
World trade is expected to lose momentum in the second half of 2022 and remain subdued in 2023 as multiple shocks weigh on the global economy. WTO economists now predict global merchandise trade volumes will grow by 3.5% in 2022—slightly better than the 3.0% forecast in April. For 2023, however, they foresee a 1.0% increase—down sharply from the previous estimate of 3.4%.
I suppose President Alfred E. “What, Me Worry?” Biden will be sticking to his
“I don’t think there will be a recession. If it is, it will be a very slight recession. That is we’ll move down slightly,”
I guess he didn’t get the WTO memo.
Buckle up.
Tell me again. How was it wiser for us to lower manufacturing costs by contracting with China to make goods critical to the United States?
Feel good story of the day.
But we are not in a recession...
RE: But we are not in a recession...
The word “recession” has already been redefined ( just like “marriage” and “gender” ).
I don’t have anything against the Chinese people,
but I despise their government.
Just to be fair I hate mine even more.
signed American, vet.
And yet, I can’t find a single product in stores — from umbrella’s to dress shirts — that aren’t mostly made in China. It’s pathetic.
Better if manufacturing returned to USA.
Bkmk
And vaccine.
Unfortunately, it predicted much of what we are seeing in the supply chain meltdown.
It was not well received as it was contrary to current globalist corporate group think.
If my predictions continue to hold true, we can expect to see a second wave of supply chain dislocations. In this next wave, we should see a collapse of many small to medium sized companies.
This collapse could resulting in a deflationary spiral as supply chain vendors get hit by a combination of collapse of of both supply and demand as producers of critical key components shut down production due to a combination of declining orders, inability to get critical parts and raw materials and massive price shocks.
The cycle becomes a self reinforcing downward spiral as demand collapses due to the demand destruction from laid off or idled workers being unable to afford much beyond basic necessities, causing even more companies to shut down and cease production.
As the companies slow down or cease production, there will be corresponding supply chain dislocations as the companies that depend on the products of the shut down companies cannot obtain critical materials for their production. This could result in a systemic, cascading supply chain meltdown that could drive a general international economic meltdown.
We may be witnessing the beginning of serious hard times due the Biden Administrations destructive policies at a time when the world economy was already teetering on the brink due to the covid shutdowns get taken down by the dislocations.
This is not going to be a good thing for the layabouts who have been staying home living on $40K covid emergency funds for the last several years. The US Government is tapped out and cannot borrow anymore and will be even less capable as an economic downturn shuts down our demand for Treasury notes to fund the deficit spending needed to float wide spread unemployment transfer payments.
"As the companies slow down or cease production"
So are you talking about a domestic production company or an overseas production facility? It matters.
You don't seem to make any distinction between domestic production and offshored production....
.....we buy thousands of dollars of stuff every day. The one absolute is that we exhaust all possibilities NOT to buy Chinese. Occasionally, we have no choice but most often there is an alternative even if we have to pay more. Our antipathy is due to Chinese belligerence in the world, slave labor, communist rulers and threatening Taiwan which would undoubtedly lead to dead American sons, China can go to hell.
welcome news
So are you talking about a domestic production company or an overseas production facility? It matters.
You don't seem to make any distinction between domestic production and offshored production....
We live in a world economy with far flung supply chain and economic connections - that is intrinsic to the risks we face.
Production of sophisticated finished goods for domestic manufacturers depends on on a steady and reliable supply of critical components from all over the world. China, India, Mexico, Pakistan, Malaysia, Taiwan, Bangladesh, Vietnam, Pakistan, Siri Lanka, Japan, South America, the EU and every place else in between- you name it.
A lot of stuff sourced from China has it's own little sub supply chain that wends it way through any one of a number of unstable, unreliable third world shit holes as the unscrupulous Chinese vendors try to find the cheapest subcontractors.
Due to what was once very efficient, low cost shipping it's not uncommon for Work In Progress components from Chinese vendors to start in in one place in Bangladesh, Pakistan, Cambodia and Vietnam, transit to other counties for integration or other multiple value added steps before they are shipped to China for finishing and distribution to the US.
An obvious and unambiguous example is the thousands of Ford and GM cars and trucks sitting in yards waiting for critical microprocessor controls that are supplied by overseas vendors who cannot deliver due to supply chain dislocations.
Critical components are in tight supply which restricts production and the unavailability of a single critical component can shut down production entirely. It's really hard for a company with thousands of employees to make payroll when they are operating at half capacity and facing and economic downturn due to Biden inflicted consumer financial exhaustion.
At some point, even GM and Ford have to shut down factories and lay off workers as unsold inventory piles up. Laid off workers either cannot buy new cars and trucks or will delay the purchase due to the threat of economic hard ship. That means all those Fords and Chevys, some produced a high price premium due to shortages and inflation, are are going to have a hard time moving off the dealer lots. When they do get sold, they may not sell for a profit.
So GM and Ford cut orders to the foreign and domestic control manufacturers who in turn, cut their orders the Taiwanese microprocessor makers who are burning money trying to ramp up their production and deal with their complex supply network.
It becomes a self reinforcing cycle of negative feedback
This is playing out at ALL levels of the inter connected and inter dependent world economy.
It's real - and it's getting worse - not better under Biden's reign of across the board economic self destruction.
... President Trump was right again, bring the American corporations and jobs back home for security of America’s future.
‘Everything is Fine’
https://www.youtube.com/watch?v=fh9y6aaVyas
Are they measuring in US dollars, or what? Inflation adjusted, that would mean negative growth, not positive. Everything in modern life is lies, damn lies, and statistics. Satan's left thumb weighs in on everything.
Well hey look! FJB and Buttplug are fixing the ports mess afterall!
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