1/3
~70% of all shipping is conducted on a long-term contract. A cargo ship is essentially a shuttle between ports. If they have to go around Africa, that adds 20+ days to the route.
So, if a ship can make six runs yearly, the extra distance means it can only do four or five runs yearly under current conditions.
To make up for this shortfall of runs, excess shipping capacity is contracted on the βspotβ market.
This chart shows worldwide βspotβ rates are up 85% in the last two weeks, the largest two-week jump (bottom panel) since Drewey started its index in 2011.
Shippers are aggressively grabbing excess shipping capacity and will pay up big to do it.
~70% of all shipping is conducted on a long-term contract. A cargo ship is essentially a shuttle between ports. If they have to go around Africa, that adds 20+ days to the route.
So, if a ship can make six runs yearly, the extra distance means it can only do four or five runs yearly under current conditions.
To make up for this shortfall of runs, excess shipping capacity is contracted on the βspotβ market.
This chart shows worldwide βspotβ rates are up 85% in the last two weeks, the largest two-week jump (bottom panel) since Drewey started its index in 2011.
Shippers are aggressively grabbing excess shipping capacity and will pay up big to do it.
2/3
The objective of the military action against the Houthis is to allow unarmed commercial ships to sail the Red Sea with affordable "war insurance" rates. These rates are up 300% to 500%.
I FEAR we are weeks or months away from commercial shipping returning to normal in the Red Sea.
Until then, supply chains remain snarled, and the inflation pressure on goods is very real.
One hour ago
@mercoglianos @johnkonrad
x.com
The objective of the military action against the Houthis is to allow unarmed commercial ships to sail the Red Sea with affordable "war insurance" rates. These rates are up 300% to 500%.
I FEAR we are weeks or months away from commercial shipping returning to normal in the Red Sea.
Until then, supply chains remain snarled, and the inflation pressure on goods is very real.
One hour ago
@mercoglianos @johnkonrad
x.com
3/3
Manfacturing lives in a Just-in-Time world.
When delivery schedules are disrupted, parts to finish your product do not arrive when needed, and the story below happens.
I FEAR more of these types of stories are coming.
Less supply = more good inflation
---
Tesla, Volvo Car pause output as Red Sea shipping crisis deepens
reuters.com
Manfacturing lives in a Just-in-Time world.
When delivery schedules are disrupted, parts to finish your product do not arrive when needed, and the story below happens.
I FEAR more of these types of stories are coming.
Less supply = more good inflation
---
Tesla, Volvo Car pause output as Red Sea shipping crisis deepens
reuters.com
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