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Category Archives: Logistic

The Story of Amazon’s Fuel-Cell Supplier Explains This Crazy Market

If one stock captures the bizarro world of finance in the past year, it is forklift fuel-cell maker Plug Power .

The story involves wacky financial engineering, a company that started the year flirting with penny-share status and became one of the country’s 200 most valuable, a bet on clean transportation that has terrible environmental ratings, and a multi-hundred-million-dollar profit for Amazon . It is so now. To top it all, this is the second time in two decades that Plug stock has gone full-bubble.

The wackiest part is that Plug Power reported negative revenue last year, a hard-to-accomplish feat. Sales less than zero is something normally reserved for a clutch of mortgage funds that have odd accounting. Cruise line Carnival had negative revenue for one quarter last year for boring reasons: huge refunds for canceled trips.

Plug Power’s sales were negative for a truly audacious reason: The share price went up. Yes, you read that right. The company structured some sales so that when customers bought enough forklift power units, they got a discount in the form of warrants, the right to buy shares at a set price in the future.

It is a great idea in principle, rewarding customer loyalty and aligning their interests with shareholders. But it works out badly in practice when the share price goes up 2,000% just as the customer needs lots more warehouses and forklifts to satisfy lockdown demand.

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Suez Canal Crisis Sends Shipping Lines Scrambling for Alternatives

Shipping companies rerouted vessels, refused to take on new customers and forecast long delays—and longer-term port congestion around the world—raising the global trade and economic stakes of the grounding of the Ever Given in the Suez Canal.

Shipping executives said even if the vessel is removed imminently, a backlog of ships waiting to pass through the canal would linger for days, and diversions of cargo could wreak havoc on port traffic around the world for weeks, upsetting the usually carefully orchestrated management of the world’s containers. The canal connects the Mediterranean and Red Seas and accounts for as much as 13% of seaborne trade and about 10% of maritime shipments of oil.

Allianz , the German insurance giant, estimated the blockage could reduce global trade by as much as $10 billion a week. It figured for every week the canal was immobilized, it could shave 0.2 to 0.4 percentage points off annual trade growth.

Caroline Becquart, senior vice president at Mediterranean Shipping Co., one of the world’s largest container lines, said the blockage “is going to result in one of the biggest disruptions to global trade in recent years.” Amid super-tight capacity that started building late last year and has lingered through this year, the accident means that companies should expect “a constriction in shipping capacity and equipment.”

A.P. Moller–Maersk A/S, the world’s largest container vessel operator, said Sunday it has rerouted 15 of its ships away from the Suez Canal and is turning some new clients away for now as it assesses its capacity. “For every day the canal remains blocked, the ripple effects on global capacity and equipment continues to increase,“ it told clients. Delays and backlogs “will continue well beyond the physical removal of the Ever Given,” the 1,300-foot container ship that wedged itself into the canal’s banks early last Tuesday. Dredging continues to free the ship, with engineers trying to refloat the vessel during high tides. Maersk said it couldn’t give clients estimated times of arrival for affected ships.

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Suez Canal: How the Ever Given Cargo Ship Got Stuck and What We Know

On March 23, at about 7:40 a.m., the Ever Given, a 1,300-foot container ship, veered to the right as it was traversing the Suez Canal, wedging its bow into the canal wall and triggering a major rescue effort.

Since then, it has blocked all traffic between the Red Sea and the Mediterranean, a major shipping route between Asia and Europe, disrupting supply chains and prompting shippers to decide whether to spend the extra time and fuel needed to go the long way around, via the Cape of Good Hope.
Where is the Suez Canal?

The Suez Canal cuts through Egypt, linking the Mediterranean Sea in the north to the Red Sea in the south. It is one of the world’s best-known and most important waterways. Nearly 19,000 vessels passed through the canal last year carrying some 1.2 billion tons of cargo. As much as 13% of maritime trade passes through the Suez Canal, including a large proportion of the world’s oil.
Who controls the Suez Canal, and why is it important?

The Suez Canal Authority, an Egyptian state institution, operates the channel. France first controlled the canal, when the initial version was completed in 1869, during Ottoman rule in Egypt. It cuts the shipping time between Europe and Asia by about two weeks, compared with the alternative route around the Cape of Good Hope, at the southern tip of Africa. Egypt’s then-leader, President Gamal Abdel Nasser, nationalized the canal in 1956, prompting the U.K., France and Israel to invade the canal zone in an attempt to secure control before accepting Egypt’s authority over the channel after the U.S. and other countries intervened. Egypt’s move was instrumental in fomenting a wave of Arab nationalism across the Middle East. The canal remains an important source of revenue for Egypt, generating billions of dollars in fees each year, although an expansion project launched by the country’s current leader, President Abdel Fattah Al Sisi, hasn’t provided the financial boost he hoped for.

How did the cargo ship get stuck in the Suez Canal?

The Ever Given was moving north up the canal toward the Mediterranean Sea when it was caught in a dust storm where wind speeds reached 40 knots, according to a person familiar with the incident. Its bow then veered into the right side of the channel, becoming embedded in the canal wall and wedging the vessel across almost the entire width of the channel. The Suez Canal Authority has said the high wind speeds were a factor in causing the accident, but it is also investigating whether human error or technical malfunctions might also have played a role.

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In the Suez Canal, Economics and Physics Make for Tough Sailing

When Evert Lataire studied the publicly available data for the Ever Given’s fateful voyage this week, he noticed the vessel did something unusual just before settling sideways in the Suez Canal: The container ship veered close to the channel’s western bank.

Mr. Lataire knew the hydrodynamics of the situation. He wrote his Ph.D. dissertation about such physics—and has simulated it over and over with model boats in an indoor testing tank in his native Flanders.

“At that point to me, the accident was inevitable,” he said.

It is still unclear exactly why one of the world’s biggest ships ended up plowing into the canal’s eastern bank, blocking the shipping choke point and upending the global supply chain. But two reasons, one rooted in physics and the other in economics, explain why the conditions were ripe for a mishap.

One factor is size. Cargo ships didn’t used to be this big. As recently as 1996, the biggest container vessels carried the equivalent of 7,000 boxes, each 20 feet long. There was no reason to go larger. “You get to a point where you need a bigger port and bigger cranes,” said Paul Stott, a U.K.-based maritime consultant who teaches at Newcastle University.

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Suez Canal Blockage Sends Asian, European Exporters Scrambling

Asian and European businesses, which rely heavily on the Suez Canal to move their products between the regions, are weighing contingency plans as efforts to move a ship blocking the canal drag out.

With work by salvage crews to dislodge the grounded container ship Ever Given stretching into a fourth day, businesses in Asia and Europe are now expecting freight costs to climb and shortages of shipping containers to worsen, after they endured months of higher costs and delays due to already stretched supply lines during the pandemic.

Jack Yang, the founder of Yiwu Jin-Jack Import & Export firm, which sells goods such as umbrellas and jewelry from its base in eastern China’s Yiwu city, said several of his clients are now considering sending goods by rail to Spain and Germany instead of dealing with a potential prolonged blockage of the canal.

Others may be forced to consider airfreight. But rail or airfreight aren’t viable alternatives in many cases, because of the volume of the cargo or the higher costs involved.

“To put things in perspective, if you were to put the entire 20,000 containers on the Ever Given [on a plane], you’d need 2,500 [ Boeing ] 747 air freighters,” said Tim Huxley, chairman of Hong Kong-based Mandarin Shipping Ltd.

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