Sinking ship: U.S. manufacturing orders from China collapse

Hotair ^ | 12/06/2022 | Beege Welborn

[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.

[Harmless Teddy Bear]

Gee so solly. I have to put gas in my car so I have no money for a big screen TV for you to use to spy on me.

[momincombatboots]

Great follow up. Personally… hoping to use it for m advantage and get a reasonable property.

[popdonnelly]

That’s awesome! Down with the CCP! Freedom for the Chinese!

[Alberta's Child]

There are a lot of misconceptions out there about how supply chains work, and the importance of the economies of scale in freight transportation. It costs a heck of a lot less to transport a TV or new vehicle component 8,000+ miles across an ocean in a shipping container than to put it on a truck and deliver it 100 miles away here in the U.S.

[Hardastarboard]

I'm sure President Biden and the Democrat Party understand all of that, and more, even better than you, and have already taken all of that into account.

/sarc, in case the bitter, dripping sarcasm isn't obvious.

Great posts, BTW

[SauronOfMordor]

If people see uncertainty in their financial future, they will defer buying stuff. They will tell themselves “I can get another year’s use out of my coat/toaster/phone/tv/etc”.

You need to buy food and gas, you need to pay your utility bills. All else can be deferred.

[Cen-Tejas]

.....most people don’t understand that the current, prevailing interest rate “on the street” (meaning what the average guy or gal pays NOT WHAT WALL STREET pays) dictates whether or not and WHEN you buy big ticket items. Just one example is a house. I live in my house because I pounced on low interest rates fixed for 30 years. My interest rate is 2 7/8. If I had to pay todays “market rate”........A. I wouldn’t buy and B. I couldn’t afford it because my interest rate today would mean my payment would be twice as much.

So, spiraling interest rates are going to beat down financial activity across the board but particularly houses.

[dennisw]

Very recessionary news. Isn’t the US consumer our mighty economic engines, what keeps our economy afloat? You know, buying stuff, buying foreign/Chinese/Asian stuff. Not making stuff here.