Epoxy

October 22, 2021

Import Delays

A Record $22 Billion Worth Of Cargo Is Now Stuck On Container Ships Off California

by Tyler DurdenFriday, Oct 22, 2021 – 08:31 AM

By Greg Miller of FreightWaves,

There was fleeting hope that Southern California port congestion had turned the corner. The number of container ships waiting offshore dipped to the low 60s and high 50s from a record high of 73 on Sept. 19, trans-Pacific spot rates plateaued, the Biden administration unveiled aspirations for 24/7 port ops, and electricity shortages curbed Chinese factory output.

The reality is that the port congestion crisis in Southern California is not getting any better.Container ships off Los Angeles/Long Beach on Wednesday. Map: MarineTraffic

The time ships are stuck waiting offshore continues to lengthen. There are simply too many vessels arriving with too much cargo for terminals, trucks, trains and warehouses to handle. There were 103 container ships at Los Angeles/Long Beach terminals or waiting offshore on Wednesday, an all-time high.

Offshore, the number of ships at anchor or in holding patterns is once again nearing record territory. According to the Marine Exchange of Southern California, 70 container ships were waiting off Los Angeles and Long Beach on Monday, 67 on Tuesday and 71 Wednesday (not including other cargo ships that are loaded with boxes).Chart: American Shipper based on data from Marine Exchange of Southern California. Data bi-monthly April-Nov 2020; daily Dec 2020-present

Massive value of cargo stuck offshore

Marine Exchange data shows that ships waiting offshore on Tuesday — including container ships, general cargo vessels and other ships carrying containers — had aggregate capacity of 512,843 twenty-foot equivalent units. To put that in perspective, that is 10% more than the Port of Los Angeles imported during the entire month of September.

Assuming ships are at capacity, how much cargo value is out there in the “floating warehouse”? What’s in each box, and its value, varies dramatically — it can be worth a few thousand dollars or several hundred thousand dollars. But Port of Los Angeles stats provide a good guide.

The total customs value of the Port of Los Angeles’ containerized imports in 2020 was $211.9 billion. Given that imports totaled 4,827,040 TEUs, this equates to an average of $43,899 per import TEU. (Several other sources also estimated average cargo value at around $40,000 per TEU.)  

This suggests that the cargo currently waiting off the ports of Los Angeles and Long Beach is worth around $22 billion, roughly the equivalent of the annual revenues of McDonald’s or the GDP of Iceland.

Imports trapped on ships for over a month

Data from the Signal platform shows that wait time from anchorage to a berth in Los Angeles rose to an all-time high 13 days on Wednesday, up 65% from the beginning of September.Chart: American Shipper based on data from Los Angeles Signal. Note: Average is 30-day trailing average.

But the average wait time doesn’t tell the full story. Ships have been sitting in San Pedro Bay for more than twice that long.

Most of the vessels that still have no terminal berth assignments despite extended wait times are small ships operated by Chinese players such as BAL Container Line that entered the trans-Pacific market for the first time this year. Some of the ships stuck in the queue have been chartered at exorbitant rates, raising the question of whether charterers accounted for such lengthy delays.

American Shipper was contacted by a U.S. manufacturer who has over 100 containers of goods trapped aboard the Chinese-owned Zhong Gu Jiang Su. The ship has been waiting offshore for over five weeks, since Sept. 13, and has yet to obtain a berth assignment, according to the Marine Exchange master queuing list.

The U.S. manufacturer, who booked through a freight forwarder, spoke on condition of anonymity. “This is really impacting our production,” he said, noting that the trapped goods are “a major component” in his company’s manufacturing process.

“We can’t get any type of help or get any type of escalation from anyone,” he said. He was told that the ship operator “hadn’t negotiated with the terminals for a berth” before arrival, which led to the extended delay.

Among the Chinese-linked ships with no berth assignment stuck in the queue, the Martinique has been waiting the longest, since Sept. 9. Loadstar reported that it is on charter to Transfer, which is owned by a Chinese logistics provider that is in turn partially owned by Chinese e-commerce giant Alibaba.

The BAL Peace has been waiting without a berth assignment since Sept. 25, as has the S Santiago.

According to Alphaliner, BAL is chartering the S Santiago for around $125,000 a day. An industry source told American Shipper the rate was $135,000 per day. So far, that ship has been waiting — and not loading any more revenue-generating cargo — for 26 days straight.

https://www.zerohedge.com/economics/22-billion-worth-cargo-now-stuck-container-ships-california

October 22, 2021

Import Delays

A Record $22 Billion Worth Of Cargo Is Now Stuck On Container Ships Off California

by Tyler DurdenFriday, Oct 22, 2021 – 08:31 AM

By Greg Miller of FreightWaves,

There was fleeting hope that Southern California port congestion had turned the corner. The number of container ships waiting offshore dipped to the low 60s and high 50s from a record high of 73 on Sept. 19, trans-Pacific spot rates plateaued, the Biden administration unveiled aspirations for 24/7 port ops, and electricity shortages curbed Chinese factory output.

The reality is that the port congestion crisis in Southern California is not getting any better.Container ships off Los Angeles/Long Beach on Wednesday. Map: MarineTraffic

The time ships are stuck waiting offshore continues to lengthen. There are simply too many vessels arriving with too much cargo for terminals, trucks, trains and warehouses to handle. There were 103 container ships at Los Angeles/Long Beach terminals or waiting offshore on Wednesday, an all-time high.

Offshore, the number of ships at anchor or in holding patterns is once again nearing record territory. According to the Marine Exchange of Southern California, 70 container ships were waiting off Los Angeles and Long Beach on Monday, 67 on Tuesday and 71 Wednesday (not including other cargo ships that are loaded with boxes).Chart: American Shipper based on data from Marine Exchange of Southern California. Data bi-monthly April-Nov 2020; daily Dec 2020-present

Massive value of cargo stuck offshore

Marine Exchange data shows that ships waiting offshore on Tuesday — including container ships, general cargo vessels and other ships carrying containers — had aggregate capacity of 512,843 twenty-foot equivalent units. To put that in perspective, that is 10% more than the Port of Los Angeles imported during the entire month of September.

Assuming ships are at capacity, how much cargo value is out there in the “floating warehouse”? What’s in each box, and its value, varies dramatically — it can be worth a few thousand dollars or several hundred thousand dollars. But Port of Los Angeles stats provide a good guide.

The total customs value of the Port of Los Angeles’ containerized imports in 2020 was $211.9 billion. Given that imports totaled 4,827,040 TEUs, this equates to an average of $43,899 per import TEU. (Several other sources also estimated average cargo value at around $40,000 per TEU.)  

This suggests that the cargo currently waiting off the ports of Los Angeles and Long Beach is worth around $22 billion, roughly the equivalent of the annual revenues of McDonald’s or the GDP of Iceland.

Imports trapped on ships for over a month

Data from the Signal platform shows that wait time from anchorage to a berth in Los Angeles rose to an all-time high 13 days on Wednesday, up 65% from the beginning of September.Chart: American Shipper based on data from Los Angeles Signal. Note: Average is 30-day trailing average.

But the average wait time doesn’t tell the full story. Ships have been sitting in San Pedro Bay for more than twice that long.

Most of the vessels that still have no terminal berth assignments despite extended wait times are small ships operated by Chinese players such as BAL Container Line that entered the trans-Pacific market for the first time this year. Some of the ships stuck in the queue have been chartered at exorbitant rates, raising the question of whether charterers accounted for such lengthy delays.

American Shipper was contacted by a U.S. manufacturer who has over 100 containers of goods trapped aboard the Chinese-owned Zhong Gu Jiang Su. The ship has been waiting offshore for over five weeks, since Sept. 13, and has yet to obtain a berth assignment, according to the Marine Exchange master queuing list.

The U.S. manufacturer, who booked through a freight forwarder, spoke on condition of anonymity. “This is really impacting our production,” he said, noting that the trapped goods are “a major component” in his company’s manufacturing process.

“We can’t get any type of help or get any type of escalation from anyone,” he said. He was told that the ship operator “hadn’t negotiated with the terminals for a berth” before arrival, which led to the extended delay.

Among the Chinese-linked ships with no berth assignment stuck in the queue, the Martinique has been waiting the longest, since Sept. 9. Loadstar reported that it is on charter to Transfer, which is owned by a Chinese logistics provider that is in turn partially owned by Chinese e-commerce giant Alibaba.

The BAL Peace has been waiting without a berth assignment since Sept. 25, as has the S Santiago.

According to Alphaliner, BAL is chartering the S Santiago for around $125,000 a day. An industry source told American Shipper the rate was $135,000 per day. So far, that ship has been waiting — and not loading any more revenue-generating cargo — for 26 days straight.

https://www.zerohedge.com/economics/22-billion-worth-cargo-now-stuck-container-ships-california

October 21, 2021

China Conundrum

No Surprises in China’s Slowdown

Q3 GDP growth was largely in line with long-running trends.

By Fisher Investments Editorial Staff, 10/18/2021 Share

Chinese GDP growth slowed to 4.9% y/y in Q3, with most pundits agreeing the problems at Evergrande and associated real estate woes, combined with September’s electricity shortage, took a big bite out of the economy. While we agree those issues did have some negative effects, most of today’s coverage overstated them and ignored a simple but important point: Q3’s growth rate is right in line with the long-running trend. In our view, that makes these results a return to pre-pandemic normal, not a sign of sudden big problems in the world’s second-largest economy—a fine backdrop for stocks.

Also lost in most coverage: Chinese GDP is so far on track to meet the government’s full-year target of at least 6%, as it is up 9.8% year to date from 2020’s first three quarters.[i] Obviously there is some COVID skew there, but according to China’s National Bureau of Statistics’ (NBS) press release, the compound growth rate over the past two years is 5.2%.[ii] That is very much in line with pre-pandemic growth rates. So is Q3’s 4.9% growth, as Exhibit 1 shows—it largely extends the decade-long slowdown from the double-digit growth rates of old.

Exhibit 1: Slowing Growth Is the Norm in China

Source: FactSet, as of 10/18/2021.

Much of the sour sentiment today stemmed not from the headline GDP figure, but from September data—specifically industrial production and real estate. The former slowed to 3.1% y/y, the lowest rate since last year’s lockdowns, which pundits interpreted as a sign that the energy crunch is taking a big toll on factories.[iii] Yet slow growth isn’t contraction. Take this with a grain of salt or two, as the accuracy of seasonal adjustments is an open question, but industrial production was about flat month-over-month (up 0.05%, according to the NBS).[iv] Even if reality was a bit worse than that, it doesn’t point to electricity shortages sucker punching heavy industry. Rather, it points to the sector overall doing what it could in the face of a stiff headwind.

Reading into any one month as a sign of things to come is generally an error, but we think that is especially true of September’s industrial production. The electricity crunch is a one-off negative, not a permanent state. Over the past several days, the government has taken a number of steps to ease the electricity shortage, including easing price controls and beefing up coal production. That suggests the power shortage should ease sooner rather than later, giving factories a shot in the arm.

In our view, reading too much into September’s real estate data is similarly shortsighted. Yes, home sales fell -16.9% y/y in the month.[v] But is that any wonder, what with uncertainty over Evergrande and other property developers weighing on sentiment? And with regulators directing banks to restrict credit for developers and home buyers? Those restrictions are already easing, which should help sales stabilize looking forward. Plus, even with the late-summer swoon, home sales are up a whopping 17.8% year to date through September versus 2020’s first 9 months.[vi] Meanwhile, residential real estate investment fell a much milder -1.6% y/y in the month and is up 10.9% year to date.[vii] Here too, we wouldn’t read into one month, but the sharp divide between September’s sales and investment activity shows Evergrande’s woes aren’t representative of the property sector as a whole. The central bank’s recent measures easing liquidity for property developers should further support stability.  

At a philosophical level, we think the heightened focus on heavy industry and real estate shows that the West broadly has an inaccurate view of China’s economy. Several outlets have claimed real estate is responsible for 29% of Chinese GDP, which they calculate by folding in furniture sales, construction and anything tangentially related to the sale of a home. In our view, all the assumptions folded into that figure are debatable, making it more accurate to look at pure real estate only. That figure—real estate, renting and leasing activities—was just north of 10% of GDP pre-pandemic, which is bigger than the US but not the driving economic force.[viii] Even if you fold construction into that—which includes a lot of things unrelated to residential and commercial real estate—you wind up at 17%, not nearly 30%.

Similarly, while manufacturing is more important economically in China than in more developed countries, it was still only about 39% of pre-pandemic GDP.[ix] Services, which gets far less attention, now generates the majority of Chinese GDP—53.1% pre-pandemic and in 2020. China now has an official Index of Services Production, which grew 5.2% y/y in September and even accelerated from August.[xi] The Tech-heavy component of that index is up 19.3% year to date.[xii] The legacy areas of China’s economy may have hit a speed bump, but those more oriented to China’s future are doing quite well. Incidentally, they are also more insulated against the temporary electricity issues, as factories are much, much more energy-intensive than offices.

China’s economy isn’t in perfect shape, but last we checked, no economy in the history of the world was ever perfect. All economies have pockets of strength and weakness at any given time. China’s weaker pockets are getting all the attention right now, but the stronger areas are more than offsetting them and helping the world’s second-largest economy continue adding to global GDP. That is a just-fine economic environment for stocks globally, in our view.

https://www.fisherinvestments.com/en-us/marketminder/no-surprises-in-chinas-slowdown

October 21, 2021

China Conundrum

No Surprises in China’s Slowdown

Q3 GDP growth was largely in line with long-running trends.

By Fisher Investments Editorial Staff, 10/18/2021 Share

Chinese GDP growth slowed to 4.9% y/y in Q3, with most pundits agreeing the problems at Evergrande and associated real estate woes, combined with September’s electricity shortage, took a big bite out of the economy. While we agree those issues did have some negative effects, most of today’s coverage overstated them and ignored a simple but important point: Q3’s growth rate is right in line with the long-running trend. In our view, that makes these results a return to pre-pandemic normal, not a sign of sudden big problems in the world’s second-largest economy—a fine backdrop for stocks.

Also lost in most coverage: Chinese GDP is so far on track to meet the government’s full-year target of at least 6%, as it is up 9.8% year to date from 2020’s first three quarters.[i] Obviously there is some COVID skew there, but according to China’s National Bureau of Statistics’ (NBS) press release, the compound growth rate over the past two years is 5.2%.[ii] That is very much in line with pre-pandemic growth rates. So is Q3’s 4.9% growth, as Exhibit 1 shows—it largely extends the decade-long slowdown from the double-digit growth rates of old.

Exhibit 1: Slowing Growth Is the Norm in China

Source: FactSet, as of 10/18/2021.

Much of the sour sentiment today stemmed not from the headline GDP figure, but from September data—specifically industrial production and real estate. The former slowed to 3.1% y/y, the lowest rate since last year’s lockdowns, which pundits interpreted as a sign that the energy crunch is taking a big toll on factories.[iii] Yet slow growth isn’t contraction. Take this with a grain of salt or two, as the accuracy of seasonal adjustments is an open question, but industrial production was about flat month-over-month (up 0.05%, according to the NBS).[iv] Even if reality was a bit worse than that, it doesn’t point to electricity shortages sucker punching heavy industry. Rather, it points to the sector overall doing what it could in the face of a stiff headwind.

Reading into any one month as a sign of things to come is generally an error, but we think that is especially true of September’s industrial production. The electricity crunch is a one-off negative, not a permanent state. Over the past several days, the government has taken a number of steps to ease the electricity shortage, including easing price controls and beefing up coal production. That suggests the power shortage should ease sooner rather than later, giving factories a shot in the arm.

In our view, reading too much into September’s real estate data is similarly shortsighted. Yes, home sales fell -16.9% y/y in the month.[v] But is that any wonder, what with uncertainty over Evergrande and other property developers weighing on sentiment? And with regulators directing banks to restrict credit for developers and home buyers? Those restrictions are already easing, which should help sales stabilize looking forward. Plus, even with the late-summer swoon, home sales are up a whopping 17.8% year to date through September versus 2020’s first 9 months.[vi] Meanwhile, residential real estate investment fell a much milder -1.6% y/y in the month and is up 10.9% year to date.[vii] Here too, we wouldn’t read into one month, but the sharp divide between September’s sales and investment activity shows Evergrande’s woes aren’t representative of the property sector as a whole. The central bank’s recent measures easing liquidity for property developers should further support stability.  

At a philosophical level, we think the heightened focus on heavy industry and real estate shows that the West broadly has an inaccurate view of China’s economy. Several outlets have claimed real estate is responsible for 29% of Chinese GDP, which they calculate by folding in furniture sales, construction and anything tangentially related to the sale of a home. In our view, all the assumptions folded into that figure are debatable, making it more accurate to look at pure real estate only. That figure—real estate, renting and leasing activities—was just north of 10% of GDP pre-pandemic, which is bigger than the US but not the driving economic force.[viii] Even if you fold construction into that—which includes a lot of things unrelated to residential and commercial real estate—you wind up at 17%, not nearly 30%.

Similarly, while manufacturing is more important economically in China than in more developed countries, it was still only about 39% of pre-pandemic GDP.[ix] Services, which gets far less attention, now generates the majority of Chinese GDP—53.1% pre-pandemic and in 2020. China now has an official Index of Services Production, which grew 5.2% y/y in September and even accelerated from August.[xi] The Tech-heavy component of that index is up 19.3% year to date.[xii] The legacy areas of China’s economy may have hit a speed bump, but those more oriented to China’s future are doing quite well. Incidentally, they are also more insulated against the temporary electricity issues, as factories are much, much more energy-intensive than offices.

China’s economy isn’t in perfect shape, but last we checked, no economy in the history of the world was ever perfect. All economies have pockets of strength and weakness at any given time. China’s weaker pockets are getting all the attention right now, but the stronger areas are more than offsetting them and helping the world’s second-largest economy continue adding to global GDP. That is a just-fine economic environment for stocks globally, in our view.

https://www.fisherinvestments.com/en-us/marketminder/no-surprises-in-chinas-slowdown

October 21, 2021

Olin Results

Olin Announces Third Quarter 2021 Results
  
Third Quarter 2021 Highlights- Net income of $390.7 million and record adjusted EBITDA of $707.0 million- ECU Profit Contribution Index improved by 16% compared to second quarter- Epoxy and Winchester achieved record quarterly segment earnings

CLAYTON, Mo., Oct. 21, 2021 /PRNewswire/ — Olin Corporation (NYSE: OLN) announced financial results for the third quarter ended September 30, 2021. Third quarter 2021 reported net income was $390.7 million, or $2.38 per diluted share, which compares to third quarter 2020 reported net loss of $736.8 million, or $4.67 per diluted share. Third quarter 2021 adjusted EBITDA of $707.0 million excludes depreciation and amortization expense of $145.2 million and restructuring charges of $3.6 million. Third quarter 2020 adjusted EBITDA was $195.5 million. Sales in the third quarter 2021 were $2,340.1 million compared to $1,437.6 million in the third quarter 2020.

Scott Sutton, Chairman, President and Chief Executive Officer, said, “Solid quarterly adjusted EBITDA was achieved despite production interruptions from hurricanes, raw material cost volatility, and supply-chain disruptions. Our third quarter performance continues to demonstrate the resilience of our unique winning model that adapts in real-time to prioritize ‘value first’ amid a backdrop of improving structural fundamentals. Olin drove sequential pricing improvement in the third quarter 2021 for chlorine, chlorine derivatives, including epoxy resins, and caustic soda. “We expect Chlor Alkali Products and Vinyls fourth quarter segment results to increase sequentially, while the Epoxy and Winchester segment fourth quarter results are expected to seasonally decline from third quarter 2021 levels. Overall, we also expect fourth quarter 2021 adjusted EBITDA to be comparable to or slightly lower than third quarter 2021 levels.”

SEGMENT REPORTING

Olin defines segment earnings as income (loss) before interest expense, interest income, goodwill impairment charges, other operating income (expense), non-operating pension income, other income, and income taxes.

EPOXY

Epoxy sales for the third quarter 2021 were $877.7 million compared to $476.1 million in the third quarter 2020. The increase in Epoxy sales was primarily due to higher pricing. Third quarter 2021 segment earnings were $215.2 million compared to $14.9 million in the third quarter 2020. The $200.3 million increase in Epoxy segment earnings was primarily due to higher product margins, as higher pricing was partially offset by higher benzene and propylene raw material costs. The segment earnings also reflected higher operating costs. Epoxy third quarter 2021 results included depreciation and amortization expense of $21.1 million compared to $23.9 million in the third quarter 2020.

www.olin.com/investors/events-presentations/press-releases/