Wednesday, November 18, 2015

Slow Boats To...

1. ...everywhere

 a) "Circulation," wrote Marx in Capital (volume 1), "sweats money from every pore."   Trade, after all, is the arena where profit and loss achieve a certain materiality even if only of the book entry type. It's not called exchange value for nothing.

Between 1995 and 2005, the average annual rate of growth (aarg) for world merchandise exports measured 7 percent, and  doubled the rate for global economic output.   Since 2011, the rate of growth for world trade has approached parity with that of global GDP, as both  have slowed to the 2.5 percent rate.

The accelerating growth of global trade over economic output was the result of greater integration of value chains, where companies and countries "assembled" themselves in networks, or stations, for providing design, raw materials, intermediate processes, penultimate fabrications, and final assemblies for the commodities of capitalism, from commercial airliners, to toothpaste.  Trade in the modern world follows production in the value chains.  Amateurs talk about "exports" and "imports."  Professionals talk "export, re-import; import, re-export."

 b) Capital intends the expansion of value.  That's not it's "purpose," no more than a psychopath can be said to have a "purpose."  That's its, capital's need, no less than that of a psychopath.  The "mechanism" for meeting this need is aggrandizement of living labor power as wage-labor; labor-power as a value, having use only in its exchange for an equivalent to the time, cost, of its own reproduction, which time, cost-- called the necessary labor time-- amounts to only a fraction of the total labor time.

The expansion of value is the elaboration of this mechanism; that is to say the accumulation of the means of production as capital, reducing, disproportionately, the necessary labor-time, thereby expanding the surplus labor-time.  The "unintended" result is the process by which value expands; that is to say the accumulation of the means of production.  Capital is really about the conversion of  the things of production into the relations of value.  Capital is the constitution of the means of production as value aggrandizing, value extracting, value-commanding, as the condition of labor.  

The expanded value embedded in the means of production  can only be circulated by being transferred through the labor process to an expanding mass of value of commodities.  Coincident with the decline in necessary labor-time-- in the time it takes to reproduce the equivalent of the wage-- and the increase in surplus labor-time,  the value relation within commodities is altered; the value relation in all of capital is altered.  Mass of profit increases; ratio of profit decreases, and then the entire artifice that profit is collapses.  Goes down the drain.  Disappears.  Sinks below the surface. 

Overproduction is always the overproduction of capital.  In the midst of the intense exploitation of labor power, as the result of the intense exploitation of labor power, labor power isn't exploited intensely enough. Circulation slows, and the bourgeoisie expend tremendous energy in the attempt to offset this slowing; enough to break a bead, all right, but it's  a bead of cold sweat.

 c) In 2014, the world maritime fleet grew 3.5 percent to a total of 89,464 vessels at 1.75 billion dead weight tons (dwt).  That growth was the lowest annual growth in a decade.  It was also the first time in 8 years that the average age of ships engaged in maritime trade increased as the entry of new ships was not matched by the retirement of older ships.  Despite the slow growth of 2014, and the slowing of growth since 2011, the maritime fleet has more than doubled its dead weight tonnage since 2004.

The disparity between the growth of maritime capacity and the growth of trade makes it appear as if the particular predicament of this particular sector of capital is the result of disproportion, the unevenness of capitalist production, the time lags among capitals and within capitalism; an imbalance between this capital and that capital.  Sure thing, capital lacks equilibrium and proportion, but it always lacks equilibrium; it always operates in disproportion.  That's how profit is distributed.

Saying capital lacks equilibrium is like telling me the bourgeoisie are "greedy," or too greedy.  If they weren't, they wouldn't be bourgeoisie.  If capital operated in balance, or toward a condition of equilibrium, it wouldn't be capitalism.

And we are dealing, after all, not with sectors, but with the global features of capitalism-- global trade, global maritime shipping; we apprehend global trade, global transport as they manifest sustained, long-term, structural changes in capital accumulation; in the relation of new value to accumulated value.

 d) In an attempt to counteract the overcapacity in that has driven down hire rates, and decimated earnings, the maritime fleet owners have introduced a "novel" "strategy"-- slow steaming.   The shipping companies have deliberately slowed the transport time between ports.  By lengthening the cycle time (elapsed time: ship A leaves X, reaches Y, unloads/reloads, returns to X), and keeping the schedule of service unchanged (i.e. weekly service from Shanghai to Marseilles),  the number of ships required to maintain the schedule increases. 

"Slow steaming" that lengthens the trip time for container ships from Shanghai to Marseilles by 7 days to  NOW 35 days (and thus the cycle time to 70 days), will require 10 ships to provide the weekly service, as opposed to the 8 ships required for a trip time of THEN 28 days (cycle time 56 days).   That's a 25% increased in fleet utilization.  Simple? Sure.

Simple genius?  Not quite.  Let's just say each container ship can carry 10,000 TEU (twenty foot equivalent units-- the standard measure for container service) containers.  The shipping line purchased the additional ships to bring its fleet to NOW 10 based on dispatching 100,000 TEUs every 56 days  (for purposes of this exercise let's leave out the return haulage. Trade flows are never balanced anyway).  The shipping line made its determinations based, in part, on being able to charge a freight rate of about $1300 per container per trip.  

THEN, the shipping line was dispatching 80,000 TEUs on 8 ships every 56 days at $1300 per TEU, grossing about $104 million, or about $1.86 million per day.

NOW, even if the freight rate per TEU  has not declined (which it has, by some 60 percent), spreading the 80,000 TEUs over 10 ships for 70 days, means we gross about $1.49 million per day.  Do that everyday for a year, and revenues decline a gut-wrenching $146 million.  The shippers ability to circulate the value sunk into the fleet has declined; circulation time has lengthened.  Realization has become impaired as capital has accumulated.

Slow-steaming also tells us that the actual operating costs of the fleet are minimal-- that the burden the weighs upon the bourgeoisie like an alp is the fixed cost of the circulation (and production) process; the variable costs are, in fact, engineered out, or at least to a minimum in the design of the fixed asset.  It becomes "more efficient,"  that is to say less of a loss, to operate the assets half-speed, at half-capacity, then it is to sequester the ships at anchorage.

2. ...and nowhere

 e) At a certain point, overproduction overwhelms  the bourgeoisie's  attempts to mitigate its impact.  At a certain point slow-steaming reaches its penultimate expression-- no-steaming.  That point has certainly been reached in the production and circulation of petroleum supplies.  More than 100 million barrels, more than a day's worth of global consumption,  of oil are being warehoused in tankers at sea.  This is not oil being held back as a "hedge" play.  This is not the "contango."  This is not oil "belonging" to traders, but rather oil belonging  to onshore producers and suppliers.  This is oil all dressed up with no place to go.  

Iran has 40 million barrels in tankers sitting in the Straits of Hormuz; the US has 20 million sitting in the Gulf of Mexico; another 35 million sits in the waters around Malaysia and Singapore.  The hire costs of  VLCCs (very large crude carriers, capacity above 2 million barrels) make it unlikely that the price of oil can increase enough to offset the expense of storage.  Then we'll move from penultimate to the ultimate; when slow-steaming, having exhausted "no-steaming," will morph into sinking the ships and their contents. 

November 18, 2015

1 comment :

  1. Anonymous1:22 PM

    Two years ago in a post ( you published the s/C for all US sectors. The ratio was smallest for the Petroleum industry indicative of over-accumulation. Oil prices have been declining for the past year and half. Bravo! Anyone not agreeing or understanding over-production should go and read that post to appreciate the predictive power.
    And you're making an important distinction in that this time around it's not "contango".

    Thank you.