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Wednesday, September 7, 2016

Hanjin Time



Hanjin, a major Korean shipping company, has filed for bankruptcy. What a mess. There are ports that won't let the ships in because they fear they won't get paid. Hanjin also has the fear the creditors will seize their ships if they do go to port.

This is not a small company. Imagine what it's doing to global supply chains. The just-in-time system is a very tightly choreographed ballet of incoming and outgoing materials and goods. Imagine a company that needs a certain widget to complete its product. Now imagine that it's sitting on a boat somewhere with no hope of unloading any time soon. Disruptions will work their way though the economic system.

The global system is very efficient but that efficiency comes at the cost of fragility. It's cost effective to not have a huge warehouses full of widgets and only get them delivered when needed. That's great until your stuff is sitting on a ship that can't unload. Almost nobody has those huge warehouses full of stuff anymore as their competitors who reaped the advantages of just-in-time would have eaten their lunch. Now I bet there are companies out there would are wishing they had a bit more redundancy in their system.

Then there's the issue of the sailors stuck on the ships. Eventually they will run out of food and fuel. Somebody's going to have to do something or we'll have large derelict ships abandoned by their crews.

Shipping runs on very thin margins on the best of days. It's a fragile system. Now we get to see how the whole global economic system responds to a major shock. The global economy suffers from the fragility that comes from high efficiency.

Usually it's not one blow that triggers major economic depressions. However, there reaches a point where the system experiences one last insult that it cannot absorb. This shipping crisis probably isn't strong enough to bring the house of cards down on its own, but it is a major stressor. A banking crisis, catastrophic weather, political miscalculation, war -any additional factors could send things into a tailspin.

Should that happen we'd get to see how the system is restarted -if it can be. We may see global trade reduced for many years to come.

I hope someone figures out how to keep the coffee coming.

-Sixbears

11 comments:

  1. I had read about this earlier and wasn't to concerned. You had to go and open your Big mouth and say COFFEE. Now you got MY attention!!!!!! You like to sail how much coffee would your O day haul???? You could hug the coast to panama see family in texas stop in Bama a while. I will trade shine for coffee !!

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    1. Hit home, didn't it? Coffee was shipped around the world in the days of sailing ships. There is hope.

      As for shine, I can make that myself easier than sailing to the coffee lands. :)

      Guess I'll have to spend my days half asleep and drunk.

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  2. Through every crisis someone is going to make money. Perhaps there will be new widget manufacturers springing up to make parts for what is being held up on those ships.

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    1. Russia has tried to do that when the sanctions were put on, with only mixed success. Some local production is doing well, but not enough to boost the overall economy. Maybe in time. Of course, low oil prices are killing them.

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  3. Thing is ,the Baltic Dry goods index, has been running at historic lows for over a year now. This says that all those container ships are sitting in their home ports, empty of goods to ship ! This is the reason Hanjin has gone bankrupt. No one is moving goods , period.
    In the US , trucking is going broke for much the same reasons. Pretty much the only thing that is moving, is food products.

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  4. Thing is ,the Baltic Dry goods index, has been running at historic lows for over a year now. This says that all those container ships are sitting in their home ports, empty of goods to ship ! This is the reason Hanjin has gone bankrupt. No one is moving goods , period.
    In the US , trucking is going broke for much the same reasons. Pretty much the only thing that is moving, is food products.

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    Replies
    1. Thanks for heads up. I knew it was down, but did not realize shipping was down that badly across the board.

      As for food, we still want to eat.

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  5. maybe you should try growing your own coffee beans

    Wildflower

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    1. Not really a cold weather plant. If you are really careful and cover it during the cold snaps you might make it work in FL.

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  6. Thanks for the information on shipping, etc.

    We've been watching Green Deane eattheweeds.com youtubes. He lives in FL as well and will probably never ever go hungry. Cool guy!

    We are gardening here on the Red River, OK. Also, growing fruit trees and berries. Lots of pecan trees around as well.

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    1. Gardens did poorly around here. Nut trees did really bad. The only ones who produced had green houses.

      I'll have to check out the eatthe weeds guy.

      Thanks!

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