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  • Trade Routes

    Silk Roads and the flow of goods. By Me.

    [This is what I think is happening with some examples and excerpts to support the general idea]

    We are going through a few transitions right now.
    Cheap Asian labor is being slowly replaced by expensive capital to re-establish manufacturing where it cycled out of from.

    What if QE is the demand of the capital class to use real negative rates to re-establish manufacturing bases in U.S., Europe, etc... for production?

    Right now it seems like we have routes out of China, India, etc... forming to Europe and U.S. ergo flows across the Pacific and through Egypt and around the Horn of Africa, what if these flows are actually weakening and the reverse flows are strengthening.

    Europe-Russia-China rail is strengthening what if it starts shipping more in Europe to China after we have a shock and China has a huge correction? all that piled up reserve money has to go somewhere and the negative real return pressures are greatest on the holders of those assets.

    Europe-Turkey-Iran-India/China shipping is starting to take shape as well. Same premise especially if you consider alternative venues for food imports vs North America by boat.

    Transit has gotten cheaper and more expensive. Shipping got cheaper, unloading and distribution more expensive that is my feeling perhaps I am wrong. Shipping rates went down implying trade ship wise is marginally going down. But if you think about distribution costs that carry tax rates of their sovereigns upon them those probably went up since the burdens went up so you have trade becoming limited to easier unload/distance aspects. Bulk for commodities via ships probably is cheaper though but containerization and item freight via ships is not because you have to distribute after.

    Putin Builds North Korea Rail to Circumvent Suez Canal - Bloomberg

    That would give Putin partial control over links to European train networks 8,000 kilometers (5,000 miles) away. The route is as much as three times faster than shipping via Egypt’s Suez Canal, which handles 17,000 ships a year, accounts for about 8 percent of maritime trade -- and is increasingly beset by pirates and political instability in Egypt and Syria.

    “Shipping companies face higher costs to secure their cargo,” said Thomas Straubhaar, director of the Hamburg Institute of International Economics, in an e-mailed response to questions. “The rail route will get attractive if Russia increases efforts to ensure a secure and reliable transport on the long stretch between Asia and Europe. Customers don’t want their Porsche to be stolen along the way.”
    Commodity flows from Australia to Asia have been weakening perhaps it splits more toward North America with added value being shipped to Asia then cycling through Europe.
    Perhaps TPP will redirect flows as well or change how they are shaped.

    http://www.bloomberg.com/news/2013-1...d-economy.html
    Trade is falling short as emerging markets from Brazil to India slow and the dollar resumes a slide abetted by the Federal Reserve’s maintaining stimulus. The deterioration in cross-border commerce could provoke a response from policy makers eager to protect their expansions and even clashes between them if it endures, said Simon Evenett, professor of international trade at the University of St. Gallen in Switzerland.

    “Trade would have picked up much more in a normal recovery,” Evenett said in a phone interview. “The outlook is more of the same as there is much more economic uncertainty than at the start of the year.”
    Dropping Volume

    An Oct. 24 report highlighted the issue: The Hague-based CPB Netherlands Bureau for Economic Policy Analysis estimated global trade volume fell 0.8 percent in August, eroding a 1.8 percent jump of the previous month. It was the weakest performance since a 1.1 percent decline in February and left the three-month average lagging its historical pace.

    Data from individual countries reflects the gloom. The U.S. trade gap was little changed in August at $38.8 billion as exports fell 0.1 percent and imports barely budged. Chinese exports unexpectedly fell in September and shipments from Taiwan and South Korea also declined. Even with the yen falling this year, the volume of Japanese exports fell last month.

    The outlook may only be slightly better next year. The World Trade Organization last month cut its forecasts for trade growth in 2013 and 2014 to 2.5 percent and 4.5 percent respectively, both below the 20-year average of 5.4 percent. The International Monetary Fund reflected such projections two weeks ago when it cut its own forecasts for worldwide economic growth to 2.9 percent this year and 3.6 percent next year.
    Last edited by cyppok; 12 Nov 13,, 19:55.
    Originally from Sochi, Russia.

  • #2
    Originally posted by cyppok View Post

    Transit has gotten cheaper and more expensive. Shipping got cheaper, unloading and distribution more expensive that is my feeling perhaps I am wrong.
    You're wrong. Try looking up how maritime shipping allows for a greater volume to be put in transit, as opposed to a conventional railway.

    Comment


    • #3
      Originally posted by Skywatcher View Post
      You're wrong. Try looking up how maritime shipping allows for a greater volume to be put in transit, as opposed to a conventional railway.
      if you are buying commodities like iron ore, grain, coal, oil, yes.

      If I am shipping a container filled with faucets and I need it in time for the spring sale at the vendor than no.

      Shipping fell, period that is why rates on the Baltic Exchange dropped.

      Volume dropped (that one I cited...) Emerging market commodities slowed the most on the margin.
      Hapag-Lloyd

      in the article it said 3 to 4 times faster than ships. You have to think in terms of days chartered and it becomes cheaper not on volume but on a container basis. If I only have to ship 1 or 2 containers the prices become comparable. Ships may be cheaper but speed gives me back my capital sooner once the customer gets it. Turnover may replace volume.

      Asia - Europe shipping is more impacted by rail then other routes though since you can't ship by rail from Europe to U.S. via water.

      Look at it as a diffusion aspect a lot of places rail goes where ships do not. If there is trade flow diffusion points along the rail line where distribution gets set will do well. Similar to port cities on a smaller scale. I am not saying total replacement just saying there is a reversal in how things may operate.
      Ergo commodity flows may go to different places because added value for them MAY operate under similar expectations. You may put a factory near a rail line in order to have just in time manufacturing for the region because it is more cost effective than loading a ship and then have it warehoused and loaded/unloaded in masse. It is more of lowering of a barrier for commerce.

      Food subsidy barriers are very high in most countries. If the impetus goes to lowering food costs it becomes more viable to ship perishables smaller distances and rail/road become more used.

      Is Arctic shipping Russia
      Even Asia-Europe trade by sea may change if the Suez is bypassed. Think of the impact on volumes going down by 20-30% not just due to economic factors but structural as well. Pricing for the canal fees etc...
      Also how would the flows be effected if ore prices go up because volumes are down. Viability of marginal smelters and those whom use their byproducts becomes questionable.

      “Stagnation” seen in global freight flows | Trucks at Work
      Story from last year. Not much changed I figure...

      In general, demand remains weak in advanced economies. Imports by sea to the EU-27 area have declined throughout 2011 and were 14% below their pre-crisis levels at the end of last year, with imports by air also continuing on a downward trend, finishing 2011 at only 5% above pre-crisis levels.

      Weak performance of road and rail freight in the EU-27 and the U.S. also indicates weak domestic demand, according to the OECDs and ITFs numbers, with road freight within the EU continuing to recover only slowly, with volumes still 8% below the pre-crisis peak. Rail freight in the EU and the U.S. also declined by 9% and 4%, respectively, below pre-crisis levels, both groups noted.
      Everything is/was down.
      Originally from Sochi, Russia.

      Comment


      • #4
        Very well, can you provide statistical evidence supporting your claims, then?

        Comment


        • #5
          Cyp,

          Just recently I was reading about Chinese great idea to build a new channel across Nicaragua.

          The highlight of those opposing it was that shipping dropped and will continue to drop (but the environmental issues), but the Chinese are confident enough it will rise, they are ready to drop $40bn where their mouth is. Think about it.
          No such thing as a good tax - Churchill

          To make mistakes is human. To blame someone else for your mistake, is strategic.

          Comment


          • #6
            Originally posted by cyppok View Post
            If I am shipping a container filled with faucets and I need it in time for the spring sale at the vendor than no.
            Ugh, railways go to their limits quickly though.

            For scale, just the pork exported from Europe to China and HK would already need one 1500-ton, 100 TEU cargo train (i.e. like the Hamburg-Peking Express started in 2008) starting every single hour.

            Comment


            • #7
              Are trade routes more attuned to the Just in time logistics as compared to bulk transport logistics? That is the future of the logistics right now, just in time logistics because it saves more on costs of using warehouses and storage and spoilage.

              Comment


              • #8
                Originally posted by Blademaster View Post
                Are trade routes more attuned to the Just in time logistics as compared to bulk transport logistics? That is the future of the logistics right now, just in time logistics because it saves more on costs of using warehouses and storage and spoilage.
                I am not talking up rail and down ships.

                Came across slightly wrong if I do. My main point is that trade routes are morphing. Bulk traffic of commodities still dominates the shipping lanes but the container volume is shifting its' more profitable.

                Northern Route + Rail from Europe to China/Asia will eviscerate the Suez and it already had a volume drop.
                YET they still are expanding it...
                Suez Canal Container Ship Transits Drop for Sixth Consecutive Quarter | JOC

                There seems to be a value-add dispersion build up. You don't have to have a big factory in one country but many in a few and the volume doesn't have to be into one hub.
                There are lots of ports being built all over the place because the shipments to a central hub country which tries to force conditions of subsidy on that flow hamper their(those countries making ports) development.

                Everyone wants a separate way to their market so that they don't have to pay the costs of others.

                Costs drive this to a degree and development outcomes as well.
                Originally from Sochi, Russia.

                Comment


                • #9
                  Umm, you do realize that China's large economy of scale and efficient infrastructure still gives it a very large efficiency leg up over a dispersed manufacturing network centered throughout say, SE Asia or Eastern Europe?

                  Comment


                  • #10
                    not enough to overcome distance, risk, and other costs/risks.

                    Think about Pakistan, Afghanistan, even within China itself. The ability of foreign goods to be sold without barriers and subsidies all over.
                    Originally from Sochi, Russia.

                    Comment


                    • #11
                      Originally posted by cyppok View Post
                      not enough to overcome distance, risk, and other costs/risks.

                      Think about Pakistan, Afghanistan, even within China itself. The ability of foreign goods to be sold without barriers and subsidies all over.
                      Have you been paying attention to Chinese exports for the past five years (hint, its trajectory hasn't been going down)?!

                      Comment


                      • #12
                        Originally posted by Skywatcher View Post
                        Have you been paying attention to Chinese exports for the past five years (hint, its trajectory hasn't been going down)?!
                        overinvoicing to get around forex restriction by pledge collaterization, and you can book export increases forever they might not be real but the paper will tell you the numbers you want to hit.

                        I am not talking about this. I am talking about routes morphing the routes from Central Asia into China are also growing and it will grow into India as well once Afghanistan is reconnected at least via rail in the not too distant future.

                        Routes are morphing from straight hub loading to distribution patterns and bifurcating as well.
                        Going through Russia to Europe with select products lowers volume on both Horn of Africa shipping and Suez.
                        Look at the ports being built from Pakistan to Indonesia to the rail links all trying to give access where it wasn't this will shift some trade from central routes.
                        Originally from Sochi, Russia.

                        Comment


                        • #13
                          Originally posted by cyppok View Post
                          overinvoicing to get around forex restriction by pledge collaterization, and you can book export increases forever they might not be real but the paper will tell you the numbers you want to hit.
                          Wait, any econ undergrad can tell you that is not the primary driver of Chinese export competitiveness...

                          I am not talking about this. I am talking about routes morphing the routes from Central Asia into China are also growing and it will grow into India as well once Afghanistan is reconnected at least via rail in the not too distant future.

                          Routes are morphing from straight hub loading to distribution patterns and bifurcating as well.
                          Going through Russia to Europe with select products lowers volume on both Horn of Africa shipping and Suez.
                          Look at the ports being built from Pakistan to Indonesia to the rail links all trying to give access where it wasn't this will shift some trade from central routes.
                          Will you provide some figures on how much of the cargo your "planned" land routes will take up? Otherwise, it's just a bunch of malarkey if you can't back it up.

                          Comment


                          • #14
                            Originally posted by Skywatcher View Post
                            Wait, any econ undergrad can tell you that is not the primary driver of Chinese export competitiveness...


                            Will you provide some figures on how much of the cargo your "planned" land routes will take up? Otherwise, it's just a bunch of malarkey if you can't back it up.
                            unless you have honest on the ground data that backs out commodity stockpiling and re-hypothentication, then NO.

                            its not just land routes. its not malarkey.
                            I linked to the suez volumes dropping up top I think.

                            Volume through the Siberian rail is definitely strengthening if you go through their statements.

                            again you misunderstand my point. This is not just about China.
                            We are shifting and morphing trade route wise. Even if everyone is growing their trade and exports the way it gets shipped around is starting to change. A lot that is why shipping rates did not recover much.

                            Xi'an to Almaty cargo train launched - China News - SINA English
                            Border trade with Myanmar to begin soon at Pangsau Pass | Business Line

                            Burma is opening up. Central Asia is opening up. A lot of countries which got flows from others are reaching out to have them directed at themselves.

                            Turkey-Iran-Pakistan-India rail is open the flow through red sea and persian gulf may not decrease much but for certain goods it will and shift to overland if it becomes more secure/speedier.
                            Originally from Sochi, Russia.

                            Comment


                            • #15
                              Originally posted by cyppok View Post
                              unless you have honest on the ground data that backs out commodity stockpiling and re-hypothentication, then NO.

                              its not just land routes. its not malarkey.
                              So while the RMB has appreciated as the USD over the past five years, then why haven't Chinese exports stopped growing if Chinese economic growth is due to currency manipulation?

                              I linked to the suez volumes dropping up top I think.
                              You still haven't provided the data. I take that as another concession?

                              Volume through the Siberian rail is definitely strengthening if you go through their statements.

                              again you misunderstand my point. This is not just about China.
                              We are shifting and morphing trade route wise. Even if everyone is growing their trade and exports the way it gets shipped around is starting to change. A lot that is why shipping rates did not recover much.

                              Xi'an to Almaty cargo train launched - China News - SINA English
                              Border trade with Myanmar to begin soon at Pangsau Pass | Business Line

                              Burma is opening up. Central Asia is opening up. A lot of countries which got flows from others are reaching out to have them directed at themselves.

                              Turkey-Iran-Pakistan-India rail is open the flow through red sea and persian gulf may not decrease much but for certain goods it will and shift to overland if it becomes more secure/speedier.
                              And how much cargo can all these new trade routes carry?

                              Comment

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