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Seventh Largest US Importer Cuts Shipments in Half, Shipping Rates Crash

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46 comments on Seventh Largest US Importer Cuts Shipments in Half, Shipping Rates Crash

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Samsung Cuts Shipments In Half

https://twitter.com/FreightAlley/status/1537583672261500936

Food and Energy Strength

https://twitter.com/FreightAlley/status/1537531249631404032

Supply Chain Inflation Has Peaked 

Scrap steel in the gutter. Many things headed that way.

Retail Sales Flounder in May With Negative Revisions in April

As noted on June 15, Retail Sales Flounder in May With Negative Revisions in April

Retail sales fell 0.3 percent month over month with inflation adjusted sales down 1.2 percent.

Unfortunately for the Fed this does not include rent, energy, or food. 

CPI Weight

  • Owners’ Equivalent Rent (OER): 23.816%
  • Rent of Primary Residence: 7.278%
  • Energy 8.295%
  • Food: 13.361%

Those four items are 52.75 percent of the CPI. The rent combo alone is over 31 percent of the CPI.

Even if the price of electronics were top fall 25 percent, it would not make a dent in the CPI.

Meanwhile, recession looms. For discussion, please see Recession Watch Update, Where Do Things Stand After the Huge Fed Hike?

This post originated at MishTalk.Com.

Addendum – Key Reader Comments

  • Casual Observer: I’m in tech and lead times are way shorter than advertised. We received some switching equipment we weren’t due to get until fall. Orders now getting filled due to fear of POs being cancelled.
  • Billy: At least in my industry, ocean freight has had a huge impact on steel over the past 2 years. Just like this article is talking about. I’ve been calling it “Freight Density.” The cheaper your product is per pound, the more ocean freight is influenced. For example, during the peak of the C-virus shipping debacle, I heard Nike paid $80,000 for a 40′ container to cut in line and get on a shipping vessel. When you divide that by 4,800 pairs of shoes, that’s $16/pair. When they probably average $50/pair in profit it’s not a big deal. That was a worst case scenario. We were importing steel goods and paying $23,000/container or $1,045/ton. Average costs prior to the virus were $3,000/container or $136/ton. It’s now $9,000 or $409/ton. 

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Mike Shedlock

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46 Comments
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Oldest Most Voted
Christoball
Christoball
4 years ago
Speaking of demand destruction, not only do Baby Boomers have most of their consumer shopping done compared to earlier times in their lives; but over 5,300 of them are dying everyday. If you get a chance make sure to appreciate them while you can.
Covid relief gave plausible denial to an economy that was already about to enter recession 2 years ago. Many Baby Boomers who reached the average age of death during the last two years would have died anyway due too some natural cause. It was a perfect so called “fake covid moon landing” kind of event. From here on out we will see 500,000 to 1,000,000 additional deaths every year with or without covid. This all compared to 2019 as the base year. The massive Baby Boomer population is naturally having the sand in their hour glass run out.
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Robbyrob
Robbyrob
4 years ago
When interest rates fell to near-zero for years after the 2008 crash,
America had a once-in-a-lifetime window to borrow big and rebuild
infrastructure for decades to come. Why didn’t that happen? It wasn’t a
money thing. It was a lack of political will, institutional focus and
practical skills — “state capacity” https://www.thecgo.org/benchmark/state-capacity-eats-interest-rates-for-lunch/
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Billy
Billy
4 years ago
There are trucking strikes in South Korea. A lot of Samsung goods are made there and it’s very hard and costly to ship out of their ports right now.
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Doug78
Doug78
4 years ago
  • Owners’ Equivalent Rent (OER): 23.816%
  • Rent of Primary Residence: 7.278%
  • Energy 8.295%
  • Food: 13.361%

“Those four items are 52.75 percent of the CPI. The rent combo alone is over 31 percent of the CPI.”

Which also means that 47.25% of total inflation cost has the possibility of plateauing or even going down and mathematically can and probably will cut present inflation by half. The rise in interest rates will hit hard the ability of landlords to raise rents which accounts for 31% of the inflation so that in itself is a great help. Food and energy are the great unknowns and together they account for almost 22% of total inflation. If the other 78% of inflation could be contained the I think I could live with the rest which will remain uncertain for the next few months. Because of the Russian invasion of Ukraine energy will remain volatile. Metals on the other hand look to be be stabilizing and even declining after the initial runup. Food just might follow the same path. Ukraine wheat will get out and not necessarily by the sea route. Some minds have put their heads together to find ways of getting the wheat and oil out of Ukraine by land and although it makes it more expensive. As long as it gets out people will be fed.
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MPO45
MPO45
4 years ago
Reply to  Doug78
I am reading that GM and Tesla raising prices of their EVs by $6000+ because of increased prices in materials. On the real estate front, the markets I follow seems to stop selling. I get very few listings via email these past couple of weeks.
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Doug78
Doug78
4 years ago
Reply to  MPO45
Those price rises are just catchups with past metal price rises. Metals have not continued upwards since so in principle GM and Tesla car prices should also stabilize.
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Lisa_Hooker
Lisa_Hooker
4 years ago
“Seventh Largest US Importer Cuts Shipments in Half, Shipping Rates Crash”
So what is the advantage to dividing a shipment into two deliveries.
Redundancy, reduced risk? Shipping rates cheaper on smaller ships?
Language matters.
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Mish
Mish
4 years ago
Reply to  Lisa_Hooker
If it was two deliveries at 50% instead of one at 100% rates would not crash.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  Mish
Touché. 😉
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Billy
Billy
4 years ago
Reply to  Lisa_Hooker
I read it as the total volume of goods to be shipped in July was cut in half by Samsung.
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Maximus_Minimus
Maximus_Minimus
4 years ago
Luckily, some of Americas biggest exporters are in the paper/packaging/recyclables business, and must be busy. Someone’s got to dispose of all the packaging imported during stimulus.
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8dots
8dots
4 years ago
DXY is higher. With higher DXY we can buy more stuff from China, yet shipping rate flounder. Retail inventory is piling up, due to mistakes and delays. They need adjustments. Liquidations and discount prices. LNG shipping rates are plunging Cosco : two $4k freezers in your house, basement full of COST inventory that OCCUPY 10% of your $2M house, – making your house a $200K COST warehouse, – will shrink in the coming months. Overextended inventory liquidation reduce inflation.
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Casual_Observer2020
Casual_Observer2020
4 years ago
This all portends deflation. Looking at the trend the chart was going down even before covid. Imo we were headed into a recession in 2020 even without covid because of trade wars under Trump’s watch. Everything will now go back to 2017 levels. It will feel a lot worse though.
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ajc1970
ajc1970
4 years ago
Reply to  Casual_Observer2020
Trump has been gone nearly 2 years.
Any trade wars are now officially Biden’s.
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Casual_Observer2020
Casual_Observer2020
4 years ago
I’m in tech and lead times are way shorter than advertised. We received some switching equipment we weren’t due to get until fall. Orders now getting filled due to fear of POs being cancelled.
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shamrock
shamrock
4 years ago
Oil is now down about 5% for June, maybe gas and diesel will get some relief. Diesel especially if trucking demand is falling off. Lower transportation might trickle through to food.
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KidHorn
KidHorn
4 years ago
Reply to  shamrock
I think much of the problem is lack of refining capacity. That’s why diesel is getting hit harder than regular unleaded. Lower crude prices have a limited impact.
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Billy
Billy
4 years ago
I would guess holding off from upgrading your 70″ to the latest 85″ will be the choice because your stimmys stopped coming in. Along with betting on zombie companies, NTFs, imaginary currency, ect. Maybe this means that if the bear market continues, people will start evaluating companies rather than looking at a chart.
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shamrock
shamrock
4 years ago
Reply to  Billy
Not to worry, student loan cancellation should take up the slack.
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KidHorn
KidHorn
4 years ago
Wonder if Samsung will cut deliveries of their QD OLED TVs. They seem to be in big demand.
Not sure if Samsung shipping freights a lot of Samsung electronics.
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RonJ
RonJ
4 years ago
“Samsung Cuts Shipments In Half”
So, does this represent the official end of the chip crisis?
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Tony Bennett
Tony Bennett
4 years ago
$US a steamroller today
dxy @ 105
usdjpy @ 135
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KidHorn
KidHorn
4 years ago
Reply to  Tony Bennett
Not surprising. We have higher interest rates. Looks like the Euro and USD will be at parity soon.
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Jack
Jack
4 years ago
Not sure about the tweet about scrap steel in free fall – seems sensationalist and ignores that prices have only just reverted over last 6 weeks to where they were in Dec 2021. Steel prices are notoriously volatile and still much higher than 2020 and prior prices.
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Billy
Billy
4 years ago
Reply to  Jack
At least in my industry, ocean freight has had a huge impact on steel over the past 2 years. Just like this article is talking about. I’ve been calling it “Freight Density.” The cheaper your product is per pound, the more ocean freight is influenced. For example, during the peak of the C-virus shipping debacle, I heard Nike paid $80,000 for a 40′ container to cut in line and get on a shipping vessel. When you divide that by 4,800 pairs of shoes, that’s $16/pair. When they probably average $50/pair in profit it’s not a big deal. That was a worst case scenario. We were importing steel goods and paying $23,000/container or $1,045/ton. Average costs prior to the virus were $3,000/container or $136/ton. It’s now $9,000 or $409/ton. Compare those freight costs and you’ll see how it relates to steel costs:
I think the biggest questions are:
#1 how much buying power did the USD loose over the past 3 years?
#2 will the US continue it’s MMT printing press?
I feel the US is in the best position to continue to create money because our dollar is in such high demand. Especially when many countries are in a recession. Overall, I feel inflation will continue at 5-7% over the next year and may get worse after that.
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Cocoa
Cocoa
4 years ago
Like the last expansive gasp of a dead body…then exhalation
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RonJ
RonJ
4 years ago
Walmart and Target are the number 1 and 2 container importers to the U.S.
Dollar Tree is number 9. Should we be worried if Dollar Tree becomes number 1?
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  RonJ
Buying more at Target and Walmart and Jewel-Osco after the DollarandTwentyFiveCent Tree became less competitive.
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Tony Bennett
Tony Bennett
4 years ago
I’ve been warning since Summer 2021 on inventory builds.
One (of many) crime for outrageous fiscal stimulus was unnatural demand for goods. Business had to determine whether it would last … or not. I thought many would fail to correctly guess. I call it “peleton” … in honor of Peleton being one of first canaries cr*p the bed re inventory,
Well done, Congress + POTUS!
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shamrock
shamrock
4 years ago
Reply to  Tony Bennett
Every single fitness fad in the history of mankind has crashed, Peleton is just the latest.
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Tony Bennett
Tony Bennett
4 years ago
Reply to  shamrock
I always get a kick out of Weight Watchers. Oprah owns a sizeable stake. I’ve lost count number of times she has announced a big weight loss.
Of course, stock pops (and no doubt Oprah put on a trade prior to announcement) … and no one EVER says “hey, wait a minute … didn’t we go thru this before?”
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LPCONGAS99
LPCONGAS99
4 years ago
Reply to  shamrock
i watched Jack Lalane for 30 plus years……………….LOL
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Zardoz
Zardoz
4 years ago
Reply to  LPCONGAS99
He went full alcoholic at the end. Was quite prominent in the bars in Morro Bay.
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jiminy
jiminy
4 years ago
Reply to  shamrock
Running became popular in the early 70’s, there still are a lot of runners. Walking, strength training and yoga have all endured, as have many others. Fitness works although some fads desrve death.
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Jack
Jack
4 years ago
Reply to  jiminy
Running was very popular (i.e., a fad) in 1970s but a lot of races were stopped as interest waned tremendously (i.e., almost died) in 1980-90s. These were the days of headbands and cotton shorts and t-shirts. There was been a resurgence that started in the 00s pushed by marketeers selling things such as “high performance” gear – otherwise simply known as polyester shorts and t-shirts sold with a high mark-up.
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Zardoz
Zardoz
4 years ago
Reply to  Jack
Shoes have gotten massively better since the 70s.
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shamrock
shamrock
4 years ago
Reply to  jiminy
Yeah basic fitness is pretty consistent, I was more referring to laundry holders like treadmills, nordic tracks,etc.
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RonJ
RonJ
4 years ago
Reply to  Tony Bennett
Understand also, that the government lockdowns that precipitated the fiscal stimulus, were for a treatable virus. Anti-viral drugs existed prior to the declared pandemic. Oxford rigged the hydroxychloroquine trial so that it would fail. Together did the same to Ivermectin- rigged the trial to fail. The public health agencies Covid response was corrupt from the get go.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  RonJ
Orchestrated by UFO aliens among us that have taken control of World politics and banking. Where do you think the directors of the BIS, IMF and World Bank came from? Hungary?
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Jack
Jack
4 years ago
Reply to  RonJ

Agree, we need to stop the lizard people from pulling one over on us and taking over the world.

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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  Jack
Are you one of the folks that understands our current problems are a direct result of the impending war between the aliens on the dark side of the moon and Earth’s subterranean lizard people? Where do you think Bitcoin really came from.
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Maximus_Minimus
Maximus_Minimus
4 years ago
Reply to  Lisa_Hooker
Bitcoin comes from brainwashing, computer game craze, monopoly game, Pokemon, financial Ponzies, internet, and Satoshi’s brain farts.
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MPO45
MPO45
4 years ago
Interesting post, I was just reading freightwaves and it has charts about where the demand is and it still seems strong across the board for most items.
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Tony Bennett
Tony Bennett
4 years ago
Reply to  MPO45
Well, needs some context.
For starters GDP calculated quarter over quarter … so 2019 ancient history. And no mention of fedgov deficits (most of the $$s went to households / business who spent it).
US Government deficits
FY2019 (October 1st 2018 to September 30th 2019) … $980 billion
FY2020 … $3.13 trillion
FY2021 … $2.77 trillion
FY2022 (projected) … $1.41 trillion
“Free money” on the down escalator … while inventory still on the up escalator (to match never ending free money … or so business thought).
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MPO45
MPO45
4 years ago
Reply to  Tony Bennett
Who cares about deficits? I heard the same thing in the 80s, 90s, 2000s, 2010s and now 2020s. Who gives a flying f*** about deficits? If 2.77 trillion wasn’t a problem in 2021 why would 1.41t be a problem now? Why would 3t be a problem or 10t for that matter?
In the 80s the big “worry” was about 100 billion dollar deficits which is now a rounding error and joke today. If things get bad enough there will be more free money, more tax cuts and more spending. haven’t you learned this by now after all the decades you have lived on earth?
Multiple wars over the past 50 years haven’t killed the economy.
Massive fraud in 2008 didn’t kill the economy.
Global pandemic in 2020 didn’t kill the economy…yes it slowed it but not dead.
Stop with the sky is falling routine, it’s getting real old. You keep posting statistics that are all fairly irrelevant.
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Tony Bennett
Tony Bennett
4 years ago
Reply to  MPO45
“You keep posting statistics that are all fairly irrelevant.”
…
To you?
Absolutely.
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