Category: Uncategorized

Improving Flow Prognosis?

The foreground of our picture is crowded. Too much demand for too much stuff. Too few containers for too much stuff. Too many ships waiting for too few cranes. Too many containers for too few chassis’ (truck or rail). Too much throughput for too few workers.

Contemporary supply chains are organized around demand. Fulfilling demand is the mission, purpose, obsession — perhaps even graven idol — of global business. So, eyes widened and jaws gaped on September 6 when Morten Engelstoft, CEO of APM terminals, told the truth to The Financial Times, “We need lower [consumer demand] growth to give the supply chain time to catch up, or differently spread out growth. Over a long period of time, we will need to recover efficiency.” (More and more and more.)

The FT reminds us, “US imported goods in July were up 20 per cent over the previous year and 11.5 per cent over 2019 as consumers splashed out, with their spending supported by stimulus measures since the second half of last year.”

The problem is most obvious at the Ports of Los Angeles and Long Beach, together the largest-by-far maritime cargo complex in the United States. Last week a record-setting sixty-plus ships were lined up waiting to unload. (See the satellite picture below and more from the Washington Post.)

Typically it is not darkest just before dawn, but we can confidently claim that dock density is worst just before incremental improvement:

The US personal savings rate has fallen to 9.6 percent, down from 26.6 percent as recently as March. American consumers still have a bit more cash-on-hand than pre-pandemic (February 2020: 8.3 percent), but the sense of having money to burn is unlikely to return.

On Friday (September 17) the LA-Long Beach ports announced they will facilitate more hours of truck access to retrieve and return containers. This is unlikely to increase the number of trucks, but it could increase velocity, almost certainly for truckers and trucks that arrive at off-peak-hours and maybe for the whole system if enough truckers decide to do so.

According to The Financial Times, the container construction industry, “is set to pump out a record 5.2m twenty-foot equivalent units (TEUs) this year, up two-thirds on 2020.”

With the usual shippers charging premium rates for tightly constrained capacity, alternative means and methods of moving cargo are beginning to fill some crucial gaps — for those able to pay. Non-traditional vessels are delivering to non-traditional ports that can move goods along less-crowded routes.

So, in the background of our current picture we may see dawn’s thin light rising to the east of crowded San Pedro Bay. There is finally some increased shipping capacity. There is incremental improvement in moving goods. But the current pile up is huge. Even if demand finally returns to something more sustainable, it will be months before something like 2019’s flow is experienced again.

Slowly (we) turn, step by step, inch by inch

US consumer demand remains strong. Despite the Delta variant’s determined discouragement, July retail sales were 0.5 percent higher than June. The Wall Street Journal explains, “With many schools, college campuses and offices reopening, consumers shelled out more for groceries and merchandise at big-box stores. Those purchases—along with higher spending on furniture and hardware—offset another big decline in car sales, which have suffered from a global computer chip-shortage that has crimped supply.”

Even with strong and often volatile demand — and constant reports of stock-outs — the ratio of retail inventories to sales increased to 1.11 . This remains very tight. But for three consecutive months, the ratio has remained above April 2021’s 1.07 asphyxiation level. It is, however, worth noting that breathing remains difficult for the food and beverage category. Here the seasonally adjusted ratio improved from 0.72 to 0.73. Grocery demand has continued to outpace most other retail categories. Could grocery stores sell one-fifth more with better assured supply? Or have upstream challenges introduced grocery to the charms of fast fashion merchandising? Are customers buying what’s available just-in-case?

As the Federal Reserve chart (below) suggests, the ratio had stayed within a narrow range since the end of the Great Recession. But when consumers stopped buying in March and April 2020 inventory quickly accumulated. Perceiving potential for a long-term demand drought, many retailers stopped ordering… just in time to be ill-prepared for a flash flood of retail demand in May-June 2020 and escalations since. In April 2021 US retail sales peaked at nearly one-third above the April 2020 bottom, Inventories have never caught up with this Niagara Falls of cross-cutting, fast falling inventory to sales ratio.

Covid Hospitalizations Update

Since about August 27 I have been spending 14 to 16 hours per day with a very demanding Hurricane Ida and her consequences. Except for related hospitalizations in southeast Louisiana I did not pay attention to the pandemic until September 9 and 10.

What I then found was that US hospitalizations had peaked during the last week in August, consistent with prior projections (here and here). But social and political reaction to the Delta variants surge was, if anything, still rising.

Per the data display below, Israel’s and UK’s experience demonstrate that Delta’s ferocity can be diminished but transmission, disease, and hospitalizations have not (yet) shown the precipitous drop that typified prior waves. With a lower rate of overall vaccination, it would be surprising if US results depart from this pattern.


Two weeks after landfall, grid power has not been restored to more than 160,000 electrical customers in Louisiana.  Local water systems are down for about 20,000 residents.  Boil orders are in place for another 320,000 plus. By the end of the first week after landfall, over 90 percent of cell sites in southeast Louisiana had been restored. Most grocery stores are operating at close to their pre-Ida levels. Yesterday (September 11) SNAP recipients in eighteen parishes received an emergency boost equal to 55 percent of their usual monthly payment.

On this Sunday morning, more than half of retail fuel stations in southeast Louisiana have gasoline and diesel to sell.  A combination of reduced demand volatility (with fewer emergency generators needed) and streamlined Fuel Loading Racks has steadily improved fuel distribution service levels. Of nine refineries closed, four are now “operating” and one other has begun its restart process. Approximately 60 percent of Gulf of Mexico crude oil production capacity remains shut-in. Supply chain implications for US and global petrochemical flows will be significant and long-lasting.

Truck freight flows have remained remarkably stable into and through the impact area. Bulk cargo operations at the Port of New Orleans resumed on September 2, container flows restarted on September 7. Commercial flights from Louis Armstrong International Airport took off again on September 2.  Norfolk Southern and most other regional rail cargo operations were underway by September 6.

It is a complex mix of problems and progress.

Along the axis of Ida’s track, especially the first ninety miles north of landfall, there is much slower progress and many more persisting problems. More than 300,000 people remain off the grid, with no safe tap water (even none at all), spotty telecoms, primitive means to cook whatever food they can get, and open gas stations few and far between.  Many have lost the roofs off their homes or worse. Last week the heat index was in the triple digits. This week rain is predicted every day. (More and more and more.)

On August 29 a very strong force hit a dense set of interdependencies in southeast Louisiana where roughly 2.4 million people reside.  Widespread destruction of the electrical grid prompted failure of several water systems and a considerable proportion of regional telecommunications.  As emergency generators started, demand for fuel exceeded the supply capacity of available loading positions at local Fuel Loading Racks. Long lines formed at those retail gas stations that got fuel. Damaged and without grid power, refineries did not quickly restart.

Given the important role of local refineries in national fuel flows, local inventories of refined products have been sufficient for local demand. But these refineries’ flows into outbound pipelines stopped. According to the EIA, “From August 27 to September 3, total gasoline stocks on the East Coast fell by 3.6 million barrels and total gasoline stocks on the Gulf Coast fell by 3.2 million barrels.”  Hurricane Ida’s landfall was very close to Port Fourchon, a crucial neck in the hourglass that connects Gulf of Mexico oil production with Gulf coast oil refining. Bloomberg explains

The monster storm’s direct hit on Port Fourchon a few hours before sundown on Aug. 29 completely disabled the primary jumping-off point for helicopters and vessels that service hundreds of offshore platforms and rigs. Even the lone road connecting Port Fourchon to the rest of the state — Louisiana Highway 1 — was knocked out of commission by Ida’s massive wall of sea water and the tons of sand it swept ahead. “When Port of Fourchon is out of service, it breaks a link in the chain,” said Winders, a Louisiana native who’s been working in the oil industry for four decades. [Bert Winders, a Baker Hughes Inc. health and safety manager]

In contrast, the comparatively — even surprisingly — quick restoration of telecommunications functions allowed grocery demand and supply to largely persist post-Ida. Point-of-Sale digital transactions were mostly working in metro Baton Rouge from the second day-after and in metro New Orleans from the fourth day-after. Grocery distribution and retail operations were constrained by work force absences, debris on roads, and damage to facilities. But  regional sales volumes had normalized by Labor Day weekend.

It is also true that on Friday, September 10, one national chain that usually sells groceries in many locations across southeastern Louisiana had no power back-up and no telecommunications connections. The grocery market leader in the hardest-hit area did not open three stores in order to ensure other nearby stores were well-staffed and stocked.  In the aftermath of something as strong as Ida, gaps will emerge in even the most resilient networks.

Update: Delta’s Demand Curve

At the end of May when the UK — mostly England — began to experience increasing Delta-driven hospitalizations, both the USA and Israel still had a month more of declining covid-related hospital admissions.

After about eight weeks of sharply increased hospitalizations, England plateaued. Seven weeks into their own surge, the USA and Israel are seeing some softening. Will it continue? Will that plateau be replicated?

The chart below uses a logarithmic scale to better visualize the statistical ratios of three very differently sized populations.

Inventory to Sales Ratio steadies (?)

We have known for awhile that retail sales increased in June. We have wondered — worried — if inventories could get even worse. Well, worse is certainly possible, but we hoped it might be avoided. According to the US Census Bureau, hope has, just barely, hung on with the inventory to sales ratio increasing 0.8 percent in June. Combined with the 0.6 percent increase in May, we might even hope for a trend. According to the look-ahead for July (more), retail demand may be softening which would create space for inventories to claw back a bit more even in the face of continued disruptions in supply chain velocity.


The Financial Times helpfully quantifies and maps this global challenge. These great ports were designed as bottlenecks, benign or better. They have become complicated chokepoints, incremental delays accumulating into self-amplifying congestion. To manage the problems, options mostly involve expanding time or space. For many ports, time is more elastic than space. Mario Cordero, executive director of the Port of Long Beach, is pressing for opening a third shift (more).

The power of reticence?

Since mid-July the number of new confirmed cases of covid in the United Kingdom has fallen from above 50,000 per day to about 20,000 per day.

According to The Financial Times:

In the week before the government lifted most remaining coronavirus restrictions in England on July 19, the average person was in close contact with 3.7 individuals a day, according to the CoMix survey of more than 5,000 people in England carried out by the London School of Hygiene and Tropical Medicine.

The CoMix Survey does not inspire enormous confidence as a data source. But even if the precise person-count is off, if the trend is correct this clearly would contribute to mitigating circulation of covid.

I would have even less confidence in a similar survey of US residents. The roughly analogous indicator that I watch is cell phone mobility. According to the Institute for Health Metrics and Evaluation at the University of Washington, in late July overall US mobility was only six percent below pre-pandemic “typical” mobility. Below is the mobility trend generated by Cuebiq’s data analysis methodology. Gregarious behavior opens all sorts of opportunities — and risks.

宁波 no longer serene

My favorite headline from earlier this seek is “Oh no, not Ningbo!” (thank you Freightwaves). Dark humor can be helpful, especially given recent — recurring — events.

Early Sunday, August 8, operations were suspended at the Meishan Island International Container Terminal (MSICT) at the Port of Ningbo-Zhoushan. The Meishan Terminal usually handles about one-quarter of Ningbo’s annual volume of 27 million plus TEUs. So, global container flows suddenly lost the equivalent of the Port of New York-New Jersey.

Early hopes that the shut-down would be a precautionary pause had faded by Friday, August 13. A dockworker with symptoms initially tested negative, but on August 11 a covid diagnosis was confirmed. He shared tight quarters with many other workers in a port-side dormitory. Any reopening date is speculative. There is also speculation of the virus spreading to other terminals and other China ports.

While miniscule compared to other larger nations, since July 1 China has reported a troublesome bump in confirmed covid cases, which the authorities seem intent on suppressing with the most rigorous measures.

According to some maritime sources, to avoid being stuck in this bottleneck, seventy percent of carriers are self-diverting to other (already crowded) ports. The viscosity of global flows just thickened again. Velocity just slowed and wobbled again. Supply and price volatility further fluctuates. Implications for US and European ports (and economies) should be clear enough.

宁 means serene. 波 means wave.  紊 means confused or disordered.

Below is a screen capture of maritime flows (non-flows… knots… bottlenecks) at Ningbo on August 14 via MarineTraffic.

Delta’s demand curve?

The Delta variant of the coronavirus is ferociously contagious. In India more than 2.4 million deaths have been credibly attributed to Delta’s rapid spread in the subcontinent’s so-called “second wave”, extending from April to June 2021.

Delta was also the principal culprit in the United Kingdom’s — well, England’s — pandemic surge between early June and late July. On June 1, 2021, ninety residents of England were hospitalized with covid-related disease. On July 27 this surge apparently peaked with 793 covid-cases in hospital. As of August 10 the number of related deaths was continuing to climb.

Delta has been spreading rapidly in the United States since May. But through most of June Delta was not causing an observable — confirmable — increase in disease. That began to change in late June. Initial disease outbreaks were localized. But since at least June 27, we have seen increasing hospitalizations over wide areas, especially among the Gulf Coast states plus Arkansas, Missouri, and Georgia.

England is roughly the size of Alabama, but has a population double that of Texas (England has about 56 million residents). England has close to a 90 percent vaccination rate for residents 18 and over, compared to about 56 percent of Texans over age 18 or almost 44 percent of residents 18 and older in Alabama. (More.) Comparing the US experience with Delta to that of England is imprecise.

But because inquiring minds want to know, if the US demand curve for Delta is anything like that of England’s, the US won’t achieve nation-wide peak hospitalizations until early September. Given the much larger geography and lower vaccination rates in the United States, I would not be surprised to see an extended rise. And — England’s fairly high plateau for hospitalizations is interesting too (see first chart above).

Delta is much more optimized to humans than earlier variants. What about Lambda? The covid demand curve in Peru, where Lambda has dominated, may suggest what a post-Delta wave could look like.


August 13 Addition:

Israel is one of the most vaccinated (and healthcare data sophisticated) nations on the planet. Much smaller than England and with less than 10 million residents, Israel and its residents have been early and effective at mitigating covid’s evolving threat. But even Israel is finding Delta a significant challenge. It is now in the seventh week of increased hospitalizations with no signs of softening case counts. The second chart below shows US, UK, and Israel covid hospitalizations on a comparative logarithmic scale. This helps to reveal potential patterns between such dramatically different population samples.