Spot rates for container shipping are staying up, but only because ocean carriers continue to blank voyages big time.
If you were shipping and you feared your voyage would be blanked, what would you do? You would be prepared to buy some shipping at spot, to be sure you can get on the ship. Your ratio of long-term (and possibly delayed) contracting for shipments and your short-term purchases would change in favor of the short term. And that would keep short term demand up in spite of a long-term need going down. That’s what’s happening now.
With COVID-19 out there, and no certainty about international trade, it seems certain that conditions are much worse than are being reported based on shipments. At some point the other shoe will drop, and all prices will go down. We need not to trust the BIMCO spot prices for future predictions right now.
Coronavirus issues, particularly in China, are creating real problems for Dried Distiller Grains (DDGS) shipments. The lack of inbound containers from China means that there are not enough containers to ship DDGS out of the US.
DDGS is a byproduct of ethanol production, and in this part of the Midwest US, there is much ethanol production. It is some of the most productive corn land in the US. The DDGS are primarily used as animal feed. China imports DDGS as feed for pork in the older times. I’m not sure how much they are importing right now due to the tariff fight and the pork disease issue in China. China’s pig production is just recovering from that tragedy a year or so ago.
The article gives an indication of container rates North Asia to West Coast US. They are trending down to attract business. blanked sailings are also a feature of the current environment in container shipping from China.
The Digital Container Shipping Association has unveiled its new T&T standard for tracking containers while en route between shipper and consignee. They are quite detailed and have been planned using some of the latest design thinking techniques, including the definition of personas who might use the system one way or another. They’ve prepared some very nice slide shows to describe at a high level what they are doing.
DCSA was launched by MSC, Maersk, Hapag-Lloyd and ONE last April, with CMA CGM, Yang Ming, Evergreen, HMM and Zim joining a month later. This is a fairly quick turnaround for a first standard delivery.
The catch will be how fast people start sticking to them when building equipment and systems. Doing so can be predicted to help sales, via a network effect– since the standards make systems compatible, there’s less hassle making one system relate to another. A close review should be done of the standards, to see how many choices individual participants are given to make the information specific to their needs. Such choices tend to produce systems that lose their compatibility if one of the partners changes, and make specific programming necessary when others try to adapt to the system. It’s the anthesis of cooperation. And these standards are meant to promote cooperation rather than competition.
An example of the issue can be seen with EDI, in which general record structures are defined, but a lot of latitude is given to provide extra information or different information. The result is that EDI needs to be specially programmed for each pair-wise interaction of companies, a problem that has haunted us for 20 years even though
EDI, in general, was a big step forward.
Let’s hope that we all have learned from the past, and can use the standard to really lubricate information flow in supply chains.