Tag Archives: economics

Physical Internet Initiative

 

The Physical Internet initiative, started in 2013, is active in 5 European countries.  Here’s a note about who is involved.

  They have a conference in Austria on July 4-6 of this year. http://www.pi.events/

A standard like this could radically change the ocean container shipping business. It would affect landside operations as well.

Among other things it proposes a new form of smart shipping container called a pi-container, which would be able to interact with its contents  as well as with external systems to relay many facts about both the products states and the cargo position. The smart container would also be sized much smaller than a standard ocean shipping container, to support smaller package transport better, and to allow greater unitization and simpler and more automated transloading capability.

But ocean carriers have the largest upfront investment in their standardized container specs, since they must be designed into ships.  It would be very disruptive to have to replace all the current ships, so the path to adoption is clearly long, but the push is coming in some form. The same goes to some extent for air, rail  and truck, but since they often handle smaller product unit sizes anyway and the capital equipment is less costly (except in the case of air, which uses smaller custom containers anyway, and do not match the remaining standards). In the case of air, cargo is frequently carried in passenger planes so the cost is covered by the people not the cargo.  And a lot of air freight is package transport anyway since small size and high value are prerequisites for the much more costly air freight.

I think attention needs to be paid to the economics of migrating to the standard.  In the case of the shipping container the economics drove the transformation.  Economics must drive progress on a new model for transport as well.

Source: Physical Internet: simulation | TRACE

There are some real heavyweights involved in the initiative. Their website is below. It is intended as an open standard, that would encourage all carriers and shippers to use the ideas to simplify cooperation and handling of products during shipment, as well as increase visibility to the discrete product level and allow finer sensing of the many quality dimensions products of varying sorts need during shipment and delivery.

  physical internet initiative

Source: Physical Internet Initiative

Their publications are listed in a tab on their site.

Like most standards groups, we don’t know nor can we predict whether this standard will take hold. It has some big retail and grocery backers, but that is no guarantee.

There aren’t any after 2013, which raises the question whether this initiative is now defunct.

Rickmers Maritime: ‘modern Greek tragedy’ 

Firms that charter out ships to others to move cargo are in big trouble. There’s a squeeze, with overcapacity in the usage market, and  capitalization issues in these asset based firms, who need to borrow to own ships, but do not try to use them themselves, instead finding others to rent to.  Some of these firms will probably go down, as Rickmers Maritime Trust did. Stock price is no measure of a firm’s chance for success. Post-US election and Brexit, volatility of international trade factors is a given, and these firms, as intermediaries, are ideally placed to suffer most from the oscillations.  They need predictability to buy ships for the long term, and rent (charter) them for a shorter term.

What’s the future?  Interest rates are bound to go up!  Charter rates are not going up, and may go down quite a bit.  It will be harder to find credit worthy customers, since they cannot predict their demand as well as before.  We will see higher bad debt problems, such as Hanjin posed.

Loss of some of these intermediaries will reduce the options available for those who want to move cargo, and will increase capital needs just as that is the last thing they need.

Source: Analysis: Rickmers Maritime not alone; we may see a modern Greek tragedy – The Loadstar

Lost Generation in advanced biofuels at scale

This article offers an interesting perspective and economic analysis of why ethanol fuel has not taken off despite lots of price supports.  Essentially a lot of people bet wrong about what would happen with oil.  There is a proposal for how to help the situation based on an report from the ICCT.  california-contracts-for-difference_white-paper_icct_102016

screenshot-www-biofuelsdigest-com-2016-10-19-08-28-02Source: Lost Generation: ICCT’s financing scheme to jump start advanced biofuels at scale : Biofuels Digest