Crypto News: Supply Lines: Booms and busts

If you thought the shipping-capacity shortage of past few years was interesting and consequential for the global economy, just wait for the glut.

The orderbook of new container ships — most of which are slated to be delivered between this year and 2027 — stands at more than 900 vessels, and those will have the equivalent of about a quarter of the existing carrying capacity, according to Drewry.

A surge will pose a challenge from shipyards in China and South Korea, to the corporate marketeers who will have to come up with names for all those newly christened launches. (Click here for today's full story in Bloomberg Businessweek.)

The bottom line for some analysts: There's too much container supply coming to meet the demand, threatening another spell of depressed ocean freight rates hangs in the balance if the shipping lines don't take steps soon to reel in their capacity.

'Delay, Demolish'

"There is no way that carriers can allow all of the scheduled newbuild capacity to arrive as planned," Drewry's Simon Heaney says. "So they will have to delay, demolish, lay up and void sailings to tame the overcapacity burden."

It's not only spot container rates that are reflecting a supply-demand balance that's shifted away from the shortages present just a year ago. The Xeneta Shipping Index for January showed a record-large drop in long-term rates — a month-over-month decline of 13.3%.

Heading into contract negotiating season, that's welcome news for the owners of cargo and others who've felt the sting of inflation stemming from soaring freight rates.

"Shippers, well aware of market dynamics turning in their favour, have reacted, pushing carriers for major rates reductions," Xeneta CEO Patrik Berglund says in press release Tuesday. "What we're seeing now is the effect of that, as new contracts enter validity. And, for the carriers, worse is set to come."

Bloomberg Intelligence's senior logistics analyst Lee Klaskow sums it up the outlook this way:

"The container liner industry has a long history of booms and busts. Looking out this year, rates are poised to weaken further from the unsustainable peaks reached in September 2021. Since then rates have collapsed by about 80% and will be hard pressed to find support as demand growth will be flat at best this year and supply is expected to increase by mid-to-high single digits according to where the order book stands today. This may result in depressed rates into 2024 since most carriers happily trade price for volumes in what has been an undisciplined, commoditized market."

—Brendan Murray in London

Fading Pessimism | The International Monetary Fund raised its global economic growth outlook for the first time in a year, with resilient US spending and China's reopening buttressing demand against a litany of risks. Gross domestic product will likely expand 2.9% in 2023, 0.2 percentage point more than forecast in October, the fund said in a quarterly update to its World Economic Outlook. (Read the full story here.)

Strike tracker | British train drivers are set to go on strike in February with the first week alone hit by two-day nationwide action and a weekend walkout on a London Underground line. Meanwhile, France is bracing for another wave of labor unrest that will affect flights, trains and public transport.
Export pain | Taiwan's export orders fell last year for the first time since 2019, with a steep decline in December that suggests more concern ahead for the trade-dependent economy in 2023.
The last 747 | After a 54-year run, Boeing ended production of the 747. When the last of the jets flies away from its Seattle-area factory on Feb. 1, the curtain will fall on the four-engine era after Airbus already gave up its ill-fated attempt at a rival jetliner.
Full cutoff | The Biden administration is considering cutting off Huawei from all of its American suppliers, including Intel and Qualcomm, as the US government intensifies a crackdown on Chinese technology. Meanwhile, China told the Netherlands it wants to keep supply chains and trade open.
Counting the costs | Brexit is costing the UK economy £100 billion a year ($124 billion), with the effects spanning everything from business investment to the ability of companies to hire workers.
Simplify rules | The European Union is seeking to accelerate production of clean technologies by offering tax credits and domestic subsidies to companies in a bid to catch up with US President Joe Biden's landmark green package. Here's a Bloomberg QuickTake that explains why US allies are fuming over $370 billion in American subsidies and tax breaks.
Price cuts | Ford is slashing the price of its electric Mustang Mach-E by an average of $4,500 in response to Tesla's own recent cuts, stepping up the price wars in a slowing EV market.

Behind the wheel | High-tech autonomous vehicle companies and the nation's oldest union for professional drivers will clash in California this year as the state considers lifting a prohibition on testing heavy-duty driverless trucks.
Population effects | Hon Hai and tech supply-chain peers could expedite relocations from China, given the country's aging and shrinking population, Bloomberg Intelligence says. Hon Hai and tech supply chain peers could expedite relocations from China, given the country's aging and shrinking population.
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