What I can see from Logistics: A tale of a economy near to collapse.

by Throyd

I’m an europoor who works in international logistics. I’m writing this post to let the world know what I see. Because I’m scared as f*ck.

From what my wrinkles says to me there’s coming a huge crash in global economy. I think that the people who works in international logistics has a privileged position in terms to know what is happening around the world. Because when something occurs, does not matter the reason, the first affected sector is the local logistics and immediately after that the international logistics.

So, these are my thoughts from what I see on my work, as always this is not a financial blah blah. Let’s start from a global perspective which starts from China:

Whe we talk about international logistics we always think in planes and ship transport. Yeah, it’s true, but it also exists the railway transport. But you do now what is the same between the railway and sea transport? We do use the same base unit cargo: containers.

Like lot of you knows there are a lot of types of cargo containers: 20′, 40′ 40’HC, etc… The containers normally are measured in TEU (Twenty-foot Equivalent Unit), so a 20′ is a 1 TEU, a 40′ is 2 TEU… Easy, right?

I will do not search for you in google, but you can find easily info for your own research about what I’m explaining here.

China is THE monster on TEU movement. It almost cuadruplicates the second one country in TEU movement. It’s crazy how China is the engine on the world. Anyway, we have a problem. A real huge problem. What happens when the most productive country in the world, used to move, by example, 100 teus a day (fictional data) because they produce goods to fill 101 teus a day (also fictional data) starts to produce goods to fill 10 TEUs and moves 10 TEUs(fictional data too)? It produces a huge (very huge) shortage on TEUS. What we’re exactly living now.

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China has allmost all of their production stopped/paused/lowered by several reasons: Lack of raw material, COVID related (Ningbo-Zhoushan, the third port of the country was closed 2 weeks because of a single positive), or even related to local economy. So, all containers that enters China are beeing difficult to be loaded, and then transported by ship to other countries, provoking the shortage of containers.

And with demand, costs increases: before pandemic a forfait from USA – CHINA was 1.000$ aprox now is 10.000$ even 15.000$ depending on the SSLINE.

So, we don’t have enough containers for the rest of the world… ¿Why do we do not create more? To fabric a container is not easy. Not everone fabrics it because there are a lot of regulations to pass and actually they are very expensive (because demand is very high) and the fullfillment of an order takes between 3-6 months.

BUT, this is not all fault from China and if you think open minded you will understand why. As on every sector there are interests. And… When your incomes increases a 600% in two years what you should do? Increase your fleet, provide more vessel options and alliviate the shortage of containers creating more routes? Or maintain the same routes, increase forfaits, add surcharges to specific types of containers, stop the fabrication of super vessels (Ever Given kind of with 20.124 TEUs) and profit from the situation?

I let you to guess what the SSLINEs opted to.

What about the old continent?

  • UK: From the reports from my colleagues and friends I think they have one of the most complicated situations in the last 50 years. They have almost no oil, no inland transporters, scarcety on first need products and the immigrations nowadays is nearly null. Also they are starting to show inflation signals. Actually the situation will be very hard to revert: The low imports that enter in the country are very difficult to deliver to store/warehouses/fabrics due to lack of transporters which causes increases on costs. Also, this increase is repercuted on final product price. And the export works in the same way: low inland transport availability = transport price escalates = final product rises. So think what would happen if by example, a company buys cotton from Egypt to fabric shirts on UK and sell them to USA: Costs increased by Sea transport and inland transport from EGYTP – U.K. port – Fabric. Costs increased by sea transport from Fabric – U.K. port – USA. Do you know who will assume these extra cost? You sure know.

And take note that, thanks to brexit, they have to do customs clearance with everything was clearance free coming from Europe. Also this increased the costs, and the Eurotunnel (the only road/ train connection between Europe and UK) has been with queues of more than 5 hous due to customs process. Insane. Because this… yes, this also increases the costs.

  • Spain: I’m a Spaniard. And is a very shit time to live in Spain. I’m seeing final products that increases their costs because of the electricity bill. Because, why not, when almost every company has a worker telecommuting on his house, the bill is up almost 35% in less a year to fuck us even more. There are enterprises who opted to close mid day to avoid huge bills (ARCELORMITTAL)… Do not forget we have a forecast to be on shortage of transporters in 2-3 years. And Our official inflation figures are highly short compared to real world and we’re changing the way our government will charge us the tax for our homes to a more expensive one. We’re screwed as fuck and we still don’t know how much.

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