A sobering look at the shipping crisis

No easy solutions and the problem may last for a long time

No easy solutions and the problem may last for a long time
One of the best things I read this weekend was a Medium post from a trucker describing what’s happening in US shipping on the ground and why it won’t be fixed any time soon.
  • Crushing wait times at ports
  • Shortage of shipping container chassis
  • Containers are being stored wherever they can find space, just so they can unload the next ship
  • Warehouse unloading is also a snag due to poor worker pay and shortages
  • Consumers will be hit next with delays
He highlights how it’s a problem right from the port through trucking incentives and at warehouses.
This is the scary part:

“What is going to compel the shippers and carriers to invest in the needed infrastructure? The owners of these companies can theoretically not change anything and their business will still be at full capacity because of the backlog of containers. The backlog of containers doesn’t hurt them. It hurts anyone paying shipping costs – that is, manufacturers selling products and consumers buying products. But it doesn’t hurt the owners of the transportation business.”

Oil creeps higher to start the new week

WTI trades back up to above $84 on the day

There has been some exhaustion to the upside momentum but buyers are not exactly letting up either, keeping a defense at the recent lows around $80.79 last week before seizing back near-term control now on a push above its key hourly moving averages:

The $85 mark still poses a modest resistance point on the daily chart but the fundamentals continue to look solid for oil as we look towards next year.
A Bloomberg report highlighted that China’s stockpiles are down to their lowest since February 2020 and that creates more headaches for local authorities who are already needing to deal with the power crunch amid shortages of coal and natural gas.
As such, that could see state enterprises come in to replenish inventories even as prices are at elevated levels i.e. underscoring added demand for crude stocks.
OPEC+ will also be meeting later this week so there’s that to factor into consideration but I doubt the bloc will do much to shake up the status quo for the time being.

BoJ: Latest JPY weakness not a concern


The one notable mover in October has been significant JPY weakness. This has been very marked.See below for the monthly snapshot on JPY weakness.


So, the one question that was crucial was, ‘Is the BoJ worried about this?’ The answer is ‘no, not at all’. The BoJ is quite happy to see more JPY weakness. BoJ’s Governor Kuroda said:

  • JPY moving within the range of current fundamentals
  • The yen has weakened a ‘small amount’

With this major concern out of the way the rest of the meeting was entirely unspectacular. The BoJ maintained policy settings with rates kept at -0.10% and the 10 year JGB yield target kept at round 0% as expected. Revisions were both made lower for core CPI and GDP. Core CPI was down to 0.0% vs 0.6% expected and GDP growth was down as well to 3.4% vs 3.8% previous. Consumer inflation was expected to rise, as even deflationary Japan shows vulnerability to inflation. The 2022 forecast for inflation is 0.9% and 1.0% for 2023.

The takeaway

No inflation worries for the BoJ. No fears over the weak JPY. This means the JPY can remain a funding currency and is a great currency to pair with currencies set to raise rates. Dips in the NZDJPY remain medium term buys and the BoJ meeting has done nothing to change that. You can also see the decent seasonals around JPY weakness here below from Seasonax.

 Central banks

Yellen: US expects China to meet trade deal commitments

Remarks by US Treasury secretary, Janet Yellen

  • But eventually lowering tariffs in a reciprocal way could be a desirable outcome
  • Lowering tariffs could have “disinflationary” effect
  • Current inflation surge is a result of supply bottlenecks, higher energy prices
  • Inflation should ease in 2H 2022

This seems more aimed at easing the burden for businesses and consumers as inflation continues to pose a major problem across multiple sectors/industries. If they want to, they could but don’t expect China to budge on trade commitments. The deal has and always be one that is just for show. They know that, we know that.

OPEC+ meet this week. 400K barrel increase likely to remain, but some prospect of more.

An energy analyst at KPMG says OPEC+ is most likely to stick with the earlier agreed top plan of a 400,000 barrel per day increase.

But the group may ponder increasing the amount “marginally, or more substantially,”
  • by 600,000 barrels to 1 million barrels per day
This is from a piece at DJ/Market Watch but there isn’t much from the analyst to support thoughts on increasing the output.
Countering the argument OPEC+ may consider boosting output above 400k barrels are reports over the weekend (vai Bloomberg) that the OPEC+ Joint Technical Committee (JTC) significantly downgraded expectations of a market deficit at their meeting last week:
  • now expects the oil market to show a deficit of just 300,000 barrels per day in Q4, down from initial expectations of a 1.1m bpd deficit
  • The role of the JTC is to monitor the market, the JTC meets ahead of every ministerial meeting of OPEC+. The JTC met last Thursday.
The Organization of the Petroleum Exporting Countries and allies, OPEC+, hold their monthly ministerial meeting on Thursday.
An energy analyst at KPMG says OPEC+ is most likely to stick with the earlier agreed top plan of a 400,000 barrel per day increase.
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