Bearings and Shipping

Posted by Jeff 01/09/2016 0 Comment(s) The Bearing Market,

The Hanjin shipping company just filed for bankruptcy. They are the world's 7th largest container shipper and this may be of some concern to the bearings industry.

 

They are Korea's largest shipping company and this may signal months-long delays in freight coming out of that country. Which may be a signal of things to come.

 

I have lived in China, Korea and Japan and used to take ferries between those countries very often. I loved looking out from the decks as we pulled into the harbors. The infrastructure those countries have built up around their ports is amazing. Rows and rows of shipping containers were lined up to carry cars, bearings, electronics, shoes, clothes, durable goods, etc. to the U.S.It always made me a little sad knowing that those same containers were coming back to Asia from the U.S. mostly empty. Having the world's reserve currency allows the U.S. to print dollars to pay for their imports, instead of having to pay for them with corresponding exports. This is the “exorbitant priveledge” people have been talking about since the 1960s.

 

As the global economy has slowed, the baltic dry goods index (a measure of the amount of international shipping taking place) has been bouncing along some all-time lows. This means a lot of ships have been sitting around empty. Ships are big and expensive and when they sit around empty, companies go bankrupt.

 

There are clearly too many ships for the amount of trade in the world, which leads to too many ships. Until some of the shipping companies go bankrupt and supply and demand once more come into balance.

 

I wonder how profitable many of the bearing companies in the world are these days. Like the shipping industry, there has been a lot of oversupply in the market the last few years. Will bearing companies start to go under? Will balance be restored to the market?

 

Hanjin has been out of business for a day and shipping rates are already rising. There are many unprofitable bearing factories out there, kept alive through government subsidies. How many of these factories will have to go under before bearing prices start to rise?

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