Is it just a waste of money to relax the choke points in US ports?

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With supply chain problems and terrible Port congestion Under normal circumstances, especially the West Coast ports of the United States occupy everyone’s mind, the main content of the expansion in today’s newsletter is what we can learn from history. More precisely, it asked whether the experience of inefficient ports being destroyed by new methods and technologies in the 1960s could be repeated.

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Could have become a competitor, but for containers

(This is from a movie.) Today’s main works are inspired by rereading Box, Written by economist and historian Marc Levinson, an authoritative history of technology, economy, and politics—with us—containers. Trust us here: Whether you are already a trading nerd or not, you will want to read it.

One of the most interesting things happened in the 1960s and 1970s, when containerization broke New York’s extremely inefficient port arrangements. The long-standing “bulk cargo” system laboriously unloads, rearranges, and loads goods under outdated working methods, creating a large number of jobs for the organized crime-ridden unions in Manhattan and Brooklyn, while the transportation costs are greatly increased. The movie quoted above, On the seashoreThe story set in New Jersey is fictitious, but the phenomenon of the port affected by mobs and corruption is real. (still, Some people might say.)

Entering standardized containers, after overcoming strong opposition from the dockers (dockers) union, greatly improved efficiency. The industry did not continue to use the crowded small docks in New York City, but simply strangled the Hudson River in New Jersey and built a 1,500-foot container terminal there.

Is this similar to inefficiency West Coast Port Like today’s Los Angeles and Long Beach, their business hours are limited, labor practices are restricted (admittedly, unions are less sinister) and lack of automation? Will something disturb them? The answers are “yes, a little bit” and “unclear”. The necessity and potential of fundamental changes are not as obvious now as they were then.

Of course, container terminals in Long Beach and other places are not as technologically advanced as those in Rotterdam and other places in the Netherlands. Ryan Petersen, CEO of Flexport, a San Francisco freight forwarding company Recently talked about, Said: “Rotterdam has had an almost fully automated port complex for more than 20 years. In the United States, we have the Long Beach container terminal, but there are still drivers and crane operators there.” He attributed this part to the American union that resists automation. Part of its relative strength is due to a lack of government investment.

The long-term failure to build a state-of-the-art system means that the problem cannot be solved by quick fixes. Get rid of one blocking point, and the others will become obvious. For example, people are very concerned about business hours, and President Joe Biden called on dockers and large logistics companies such as UPS to work overnight. But this does not seem to be the main limitation. The shortage of warehouses full of warehouses and the shortage of trucks and chassis used to carry containers makes it difficult to transfer goods even when the terminals are open.

MSC is the world’s second largest container shipping company and operates a container terminal in Long Beach through its terminal business. But it said that when it was open overnight in September, it had only five trucks in the 3 am to 8 am shift. (You can hear Soren Toft, CEO of MSC, discuss ports, supply chains and trade, guess where today is Trade Secrets Summit.)

At this point, Trade Secrets reached the top of the mountain and asked Mark Levinson himself about the possibility of disruption and improvement in US ports due to supply chain tightening. What he said was very interesting and a bit contrary to common sense.

He said, of course, unions and lack of government support — through legal authorization and cash — helped US ports remain relatively small and inefficient.The Dutch and Belgian governments can manage the ports of Rotterdam and Antwerp as a large operation, such as forcing cargo to and from container terminals railway Not the road. The U.S. state government and the federal government do not have the power to supervise port practices in the same way. In 2013, the U.S. Supreme Court rejected a relatively mild “clean truck transportation” law in the Port of Los Angeles, which would regulate the environment and driving behavior of port trucks.

But Levinson believes that an overlooked issue is the increasing concentration of the global shipping industry.A limited number of companies control a large portion of the traffic and also run container terminal, Lack of competition may be a problem. “An infrequently asked question is, if there is a lack of investment in terminals, why don’t the shipping companies that control some terminals make these investments?” he said.

The histogram shows that the four shipping companies control nearly 60% of the capacity (market share, %).The container shipping industry is highly concentrated

As far as the current situation is concerned, it is uncertain whether any large investments are reasonable in the long run. “In the past year and a half, our rapid growth in demand for container transportation is unlikely to continue,” Levinson said. “Before the pandemic, the shipping industry was suffering from excess capacity.”

Demand is a huge factor. Driven by Biden’s massive fiscal stimulus measures, West Coast ports are particularly under pressure because they handle most of the consumer goods trade from Asia. Across the United States, the Port of Baltimore prides itself on avoiding deadlocks through investment.But Baltimore has not seen a surge in traffic at West Coast ports, especially because (ironically) the global semiconductor shortage in the supply chain has Curb auto trade.

A histogram of monthly cargo imports (equivalent to a 20-foot container) shows that the Port of Los Angeles handles more imports than before the pandemic

Expansion of trade in goods relative to overall GDP Stagnate and then fall After 2008. The aging population buys more services and fewer durable consumer goods; Compared with manufacturing traditional engines, electric car manufacturers generate much less trade in auto parts. “If you own a terminal, are you willing to invest under the assumption that this extremely fast growth rate will continue?” Levinson said. “I think this is an optimistic assumption.”

So yes, you can almost certainly make American ports, especially the West Coast ports more efficient. However, can large-scale investments in the private or public sector obtain good medium-term returns? not sure. The Port of New York City began to be interrupted in the 1960s and 1970s, when world trade relative to GDP was in a long-term upward trend for decades, although there were some major turbulences in the process. Containerization is a sure bet. Today’s situation looks more like the impact of a pandemic, an extraordinary surge in the context of a prolonged downturn. The West Coast may not undergo a complete transformation, but it may not be worth it in the long run.

Germany risk Behind European peers, As Supply chain barriers Put pressure on industrial activities.

France already Convinced this I Postpone the signing of two new trade agreements, and new Zealand with Chile, Until after the presidential election in April.

Cambodia As the second key market, the trade preference status suffered a devastating loss US plan (Nikkei, $) Review of corruption, organized crime and human rights violations in the country.

Japan’s border reopened This week freed (Nikkei, $) overseas recruitment plan Companies including electronic markets Mercari. Alan Beatty and Francesca Regalado

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