Category: zerohedge

A consortium of banks led by JPMorgan may have succeeded in bailing out Chinese commodity giant, Tsingshan Holding Group, which two weeks ago was facing a potentially terminal margin call of $8 billion forcing the Hong Kong (read China)-owned London Metals Exchange to halt trading and undo billions in trades to avoid putting China’s “big shot” nickel tycoon Xiang Guangda out of business, but that doesn’t mean that nickel trading on the LME is back to normal. Far from it: indeed: nickel has traded chaotically on the LME since it kinda, sorta reopened on March 16 after a 9 day trading halt, only to immediately halt again limit down, and then again and again, on three consecutive sessions…

… forcing the LME to expand its daily halt limit, first at 8%, then to 12% and finally to 15%.

However, Nickel still has a ways to drop now that any pressure on Tsingshan to cover its massive short is gone (courtesy of liquidity guarantees from JPMorgan and others), and thus any attempts to force a squeeze are over, and as the LME price seeks to catch down to the nickel price in Shanghai – currently around $30K per ton – where trading was not suspended and where no traders received preferential treatment as they diligently paid their massive margin calls. All of which means that nickel, which on Friday closed limit-down at $36,915 a ton on the LME, has another 20% to drop to catch down to the Chinese nickel price.

The LME’s shocking inability to do its one main duty – which is to allow price discovery, not to bail out preferential clients – has meant that nickel traders, from commodity producers, to rabid speculators, to fabricators of downstream products such as stainless steel, have been frozen out of a market where there has been a price vacuum for nearly two weeks.

It’s also why enterprising banks such as Goldman Sachs have quietly taken advantage of this opportunity to step into the broken market and offer to trade nickel away from the London Metal Exchange, Bloomberg reports: the bank has been offering to trade contracts in commodity index products, such as the S&P GSCI, whose constituents include nickel.

Of course, Goldman stepping in to provide liquidity when the entire market is shut won’t come cheap, and Goldman’s traders are bidding Nickel at $25,000 a ton, and offering it at $37,000 a ton, roughly $5K on either side of the SHFE Nickel price which closed just under $30K/ton on Friday. It also means that Goldman can make as much as $12K per ton with just one trade, an truly historic commission. The mid-point of Goldman’s bid and offer, $31,000 a ton, is roughly where some traders expect the market to unfreeze, Bloomberg reported earlier.

Meanwhile, with his exchange’s reputation below rock bottom, the embattled boss of the London Metal Exchange decided to throw others under the bus too – not just Putin – and said the banking industry bears “some responsibility” for the conditions that led to a massive short squeeze that broke the nickel market.

According to LME outgoing CEO Matthew Chamberlain, banks last year lobbied against efforts to increase transparency in metals markets; the proposed changes would have allowed the LME to crack down on the large short position held by Tsingshan Holding Group Co. before it caused an unprecedented 250% price spike last week, he said.

He may have a point: while Tsinhshan boss Xiang Guangda has a short position of over 150,000 tons, only 30,000 tons of it is held directly on the exchange. The remainder is held via bilateral, “over-the-counter” deals with banks led by JPMorgan Chase, and including BNP Paribas SA, Standard Chartered Plc and United Overseas Bank, Bloomberg reported.

“The OTC position has caused significant problems for the exchange,” Chamberlain said on Friday in a Bloomberg interview. After the LME made a proposal last year to allow the exchange greater visibility of positions held on the OTC market, “it was rebuffed by a number of banks,” he said. “I don’t think we will allow it to be rebuffed again.”

Chamberlain has called for greater regulation of the over-the-counter commodity markets, comparable to measures taken elsewhere in the wake of the global financial crisis in 2008.

“There will now need to be a mature discussion about how the impact of the OTC market on the exchange can be more properly controlled,” he said. “It’s probably a similar discussion to what we’ve seen post-financial crisis in other asset classes. That really hasn’t been applied to commodities. Maybe that needs to be done”

Of course, Chamberlain doesn’t really care if traders abandon the LME after the nickel fiasco (and after the humiliation his exchange experienced, that wouldn’t be a shock) – in January he announced he is leaving the LME to take on a new role at a blockchain startup. In the interview, he refused to say if he would still leave the LME at the end of April as planned.

The LME, which since 2012 has been owned by Hong Kong Exchange & Clearing Ltd., is the ultimate decision maker on changes to its rules. But it must consult with market participants, and generally strives to keep its core members, which include many big banks, happy. The proposal for greater transparency for over-the-counter positions last year came at the same time as the LME was facing an outcry from users over a proposal to close its open-outcry trading floor, “the Ring,” from which it later backed down.

Chamberlain has faced furious criticism from users for the exchange’s decisions over the past two weeks, after it allowed nickel prices to skyrocket to more than $100,000 a ton, then suspended trading and retroactively canceled $3.9 billion of trades. The restart of nickel trading since Wednesday has also been hit by a series of glitches in the electronic market.

Chamberlain was quick to find guilty parties there too: he blamed the misfiring electronic market on “a bug in the underlying third-party software,” and said that if the LME had waited for all such issues to be ironed out it would have further delayed the market’s reopening.

Still, he acknowledged that the exchange would have “a huge amount of work” to do to regain the trust of investors. “I don’t in any way want to understate the understandable anger. I fully understand why people feel that way.”

Authored by Mike Shedlock via MishTalk.com,

In light of recent Fed actions, I pinged Michael Pettis at China Financial Markets some questions on China’s reserves

Background

The reason for this topic has to do with the Fed’s unprecedented decision co confiscate Russia’s foreign currency reserves.

Not only was the action unprecedented, it was illegal. 

The Federal Reserve Act mandates that the Federal Reserve conduct monetary policy “so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”

Nowhere does the act give the Fed the right or power to confiscate the reserves of sovereign nations.

But that is exactly what the Fed did. 

If the Fed can do this to Russia, who else?

Weaponizing the Dollar

By weaponizing the banking system against enemies outside and within, advanced economies are losing their ‘risk free’ status. This may not change the global currency order for now, but could lead to a wild scramble for gold and other tangible assets.https://t.co/QFkdkBMnf4

— Joseph Wang (@FedGuy12) March 7, 2022

Risking Risk Free Status 

The Weekly Quill — Risking Risk-Free Status

The U.S. Crosses into No Man’s Land@Quillintel #ResearchRevolutionhttps://t.co/SRJc6Ts0O7 pic.twitter.com/cVEaS0aG0O

— Danielle DiMartino Booth (@DiMartinoBooth) March 17, 2022

Q&A With Michael Pettis

Mish: Will China now hold more commodities and fewer dollars despite the pro-cyclical nature of it? More Euros or Yen over dollars? More gold?

Michael Pettis:

• “Given that so much of China’s “reserves” are now indirect and held by state-owned banks (all the increase since 2017) it’s hard to say what the currency composition of China’s reserves are. 

• “Officially the US dollar is still by far the biggest component, but it is slowly declining. 

• “I expect that this will continue as far as the official reserves go but, as you know, the hard part of reducing the US dollar component of your reserves is figuring out what the alternative should be, and with such high and growing reserves (once you include the indirect reserves at the state-owned banks) that is a very difficult question to resolve.”

Understanding the Mathematical Difficulty

Mathematically, as a direct result of having a trade surplus with the US, China has a huge influx of US dollars. 

China can convert dollars to Euros, but what does the euro seller do with the dollars? 

Alternatives

Suppose China buys gold. Then the seller of gold has dollars. What does the gold seller do with dollars? 

And Eurobonds? There are none. The country-specific European bonds have a negative yield. One loses money holding them.

Someone must hold every dollar, every bond, every US treasury 100% of the time. Who is that someone? 

That is what Pettis meant by “as you know, the hard part of reducing the US dollar component of your reserves is figuring out what the alternative should be.”

China will buy more gold, more copper, etc, but what it would really like to do is buy Boeing or a defense contractor. 

The US would of course say no. 

It’s likely China is slowly shifting. But because of indirect reserves at state-owned banks, no one can really say by how much. 

Russia did divest of US dollars for gold but that was much easier because the amounts were also much smaller.

Unprecedented Fed Action May Have Just Started a Global Currency Crisis

I discussed the loss of risk-free status in Unprecedented Fed Action May Have Just Started a Global Currency Crisis

In one quick order, the Fed electronically rendered Russia’s foreign dollar reserves worthless, or at least unusable for now. 

Now, if you were in China’s shoes do you hold dollars or gold as reserves? What about metals?

We are not at a full blown crisis stage yet. And perhaps we do not get there this time.

But when trade wars like these start, history suggests major wars often follow.

Unmistakable Message

Team Biden just sent unmistakable message to China, Saudi Arabia, Russia, well actually everyone

• We can make your fiat reserves worthless overnight

• Buy gold

• Buy base metals.

• Hoard things you have everyone needs. 

As noted above it’s likely happening, but not at any identifiable speed. 

But guess what happens if everyone starts hoarding things that others need?

What About the Dollar as Reserve Currency?

In case you think this means the end of the dollar as reserve currency, think again: 

The Yuan Will Not Replace the US Dollar, Nor Will It Be Backed by Commodities

Don’t confuse a diminishing role for the US dollar with it’s demise as the global reserve currency. 

It’s far too early for that. 

To understand why, see the above link.

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An MV-22B Osprey that belongs to the U.S. Marine Corps crashed during a NATO exercise on Friday, killing all four Americans on board, according to CNN. 

The tiltrotor military aircraft that has earned a reputation for being dangerous and unreliable crashed in a remote region of Norway. The cause of the crash is still under investigation, and stormy weather has prevented helicopters from reaching the incident area. However, first responders used snowmobiles to reach the aircraft early Saturday. 

“It is regrettably confirmed that all four on board the plane have perished,” BBC said, citing a statement from local law enforcement, adding all victims were US nationals. 

The country’s Prime Minister, Jonas Gahr Støre, tweeted Saturday, “it’s with great sadness we have received the message that four American soldiers died in a plane crash last night. The soldiers participated in the NATO exercise Cold Response. Our deepest sympathies go to the soldiers’ families, relatives, and fellow soldiers in their unit.” 

The MV-22B Osprey was “on a training mission in Nordland County, northern Norway on Friday,” the Norwegian Armed Forces said. 

NATO’s Cold Response exercise was announced over eight months ago and isn’t connected with preparing troops for combat as Russia continues its three-week invasion in Ukraine. The exercise began on March 14 and will end on April 1. It involves some 30,000 troops from 27 member countries. 

By Ven Ram, Bloomberg Markets Live commentator and analyst

So the Federal Reserve just pushed the button that says “a little less accommodative” on its dashboard. The Bank of England has been at it for three months now.

On Wednesday the Fed sounded as hawkish as it has ever done in a long time, outlining six more rate increases this year and an intent to trim its balance sheet. The BOE brought its benchmark flush with levels that prevailed before the pandemic first struck.

You would expect those moves to ease concerns about inflation. But that’s not quite what’s happening. Expectations about price pressures aren’t even staying put. In fact, they are marching higher. In the U.S., the one-year inflation breakeven rate is fast approaching 6% and shot up a phenomenal 38 basis points yesterday — ironically, just a day after the Fed raised rates.

You could attribute the one-year rate being so elevated at least partly to the war, but what about the five-year rate that has surged some 75 basis points so far this quarter alone? You could look at the gamut of inflation derivatives ranging from zeroes to inflation forwards to real rates, and they will all pretty much portray the same story — that the tug-of-war against price pressures is far from being successful and is going the other way.

Over in the U.K., 10-year real rates are so deeply negative that they would be akin to levels of some distressed emerging-market economies. And lest it should be forgotten, the U.K. has long run a considerable current-account deficit — in effect, it depends on the kindness of strangers to fill the gap, thank you. And the central bank is “rewarding” investors with punitive real yields that they would have rejected had it come with an emerging-market label. Yet we saw a dissent vote against raising rates yesterday and the BOE sticking to its “modest tightening” needed yarn.

As Larry Summers put it, “We have gone even further towards losing it (control of inflation) in Britain” — that was in October, and since then retail-price inflation has accelerated to almost 8%. Back in November, former BOE Governor Mervyn King warned that “a satisfactory theory of inflation cannot take the form, ‘inflation will remain low because we say it will’.” Of course, it’s all too easy to raise the recession bogeyman, but a) monetary policy is still way too accommodative and not even in neutral territory yet, let alone in restrictive mode; and b) indicators of recession aren’t exactly heightened yet.

Maybe the smaller central banks in the developed world such as New Zealand and Norway can offer their bigger brethren a lesson or two: they tightened policy right when their economies needed it, and did not look the other way when inflationary fires were raging.

Russia’s assault on Ukraine has entered its fourth week, and Russian forces have now sent ground troops into the major southeastern city of Mariupol – which has been under heavy bombardment since the start of the conflict – and is now poised to fall to the military advance. Fighting has reportedly reached the center of the city of some half-million people.

“The fighting is already in the city itself,” a city official in the mayor’s office told The Wall Street Journal on Saturday. “But Mariupol remains a Ukrainian city.”

Multiple international reports have confirmed the city has been totally cut off, and has long been under siege by Russian forces, with WSJ detailing that the capital of Kiev has “tried to send military reinforcements to Mariupol, but so far this has proved impossible. “

“Oleksiy Arestovych, an adviser to Ukraine’s president, said there was no way for Ukrainian forces to break Russia’s siege, addressing criticism the government is not doing enough,” the report said.

War correspondents have cited scenes of people cooking in the streets, after electricity, gas and water have been cut off for many days running at this point, also amid freezing temperatures. Most of the civilians still there are huddled in bomb shelters, and some have risked their lives trying to make it out of the city, despite multiple short-lived attempts at establishing ‘humanitarian corridors’ to allow civilians to safely flee.

There is also the grim reality of in some instances bodies lying in the streets, with many sectors being too unsafe for anyone to go and retrieve them, also amid reports of mass graves.

This is how #Mariupol, which has been under constant siege for several days, looks from satellite. pic.twitter.com/OUFqDNkL7K

— NEXTA (@nexta_tv) March 19, 2022

One account reads:

“People sheltering in Mariupol from some of the most intense fighting anywhere in Ukraine are risking their lives each time they step foot outside their underground bunkers, a Ukrainian army commander stationed in the city has told CNN.”

In #Mariupol, there are reports this morning that clashes reached the center of the city and the area of the Azovstal plant. Yesterday the plant was hit by shelling (video by AA). pic.twitter.com/Czl0XrDWZj

— Michael A. Horowitz (@michaelh992) March 19, 2022

Awkwardly for mainstream media reporting, a prime Ukrainian military faction guarding the city is the neo-Nazi Azov Battalion. Despite mainstream pundits for many years prior to the invasion admitting the faction is a neo-Nazi group, CNN and others are now opting for watered down language like “ultra-nationalist militia” or “far-right”. 

“The Azov Battalion is an ultra-nationalist militia that has since been integrated into the Ukrainian armed forces,” CNN writes in its latest reporting.

Here’s the BBC all the way back in 2014…

Mariupol is seen as key for Russian forces’ general advance across the south, with the WSJ calling the operation to take the city “a strategic move for Moscow, which considers the southern port city a gateway that would open a land corridor between Russia and its annexed region of Crimea.”

Russian forces could soon have central regions of the east fully encircled… 

1) Latest map from @nytimes. Accompanying analysis is similar to mine – the east is in danger of being encircled. pic.twitter.com/n9DdJSUdrR

— Bill Roggio (@billroggio) March 19, 2022

Authored by Zacvhary Stieber via The Epoch Times,

Dr. Anthony Fauci said in a new interview that he is considering stepping away from the position he’d held since 1984.

Fauci, the longtime director of the National Institute of Allergy and Infectious Diseases (NIAID), was asked during a podcast released March 18 whether he was mulling retirement or transitioning to a less-demanding job.

“I certainly am because I’ve got to do it sometime,” Fauci, 81, said.

“I can’t stay at this job forever, unless my staff is going to find me slumped over my desk one day. I’d rather not do that,” he added.

Fauci was appointed to his position in 1984 during the Reagan administration.

Fauci’s comments came after Sen. Rand Paul (R-Ky.) failed in his effort to get support for a measure that would eliminate the NIAID and create three new institutes in its stead.

Paul, who has clashed with Fauci during multiple congressional hearings, said Fauci has become has become a “dictator-in-chief.”

“No one person should have unilateral authority to make decisions for millions of Americans,” Paul, a doctor, said.

Fauci and his agency had not responded to requests for comment on the measure.

Paul and other Fauci critics have taken issue with how the doctor misled the public on his agency’s funding for the Chinese lab located near the first cases of COVID-19 were recorded, his support for harsh measures during the pandemic, and his admission that he lied about the effectiveness of masks because of worries there wouldn’t be enough for health care workers.

Fauci, who has also been preparing for investigations Republicans have pledged into the COVID-19 response, has called Paul a partisan whose accusations aren’t rooted in facts.

Without mentioning Paul, the podcast host asked Fauci in the new interview whether he would leave his post soon, noting that besides Dr. Francis Collins, who exited from his position as director of the National Institutes of Health in late 2021, Jeffrey Zients was stepping down as the White House COVID-19 response coordinator.

“I have said that I would stay in what I’m doing until we get out of the pandemic phase, and I think we might be there already,” Fauci said.

“If we can stay in this, then we’re at a point where I feel that we’ve done well by this. But I don’t have any plans right now to go anywhere, but you never know.”

The doctor also said he doesn’t have many interests outside of health.

“I unfortunately am somewhat of a unidimensional physician-scientist-public health person. When I do decide I’m going to step down—whenever that is—I’m going to have to figure out what I’m going to do,” he said. “I’d love to spend more time with my wife and family. That would be nice.”

Russia said it fired a hypersonic aero-ballistic air-to-ground missile for the first time in the three-week invasion of Ukraine, destroying a weapons bunker in the southwestern region of the country, according to Bloomberg. 

Russian Ministry of Defense spokesman Igor Konashenkov told a daily briefing that the Kh-47M2 Kinzhal (also known as “dagger”) hypersonic missile struck an underground warehouse containing rockets and ammunition in the village of Deliatyn in the Ivano-Frankivsk region on Friday. 

Bloomberg cannot independently verify Russia’s claims about using the Kinzhal in Ukraine. 

Ukraine didn’t report any Russian attack on the military facility overnight and did not immediately comment on Russia’s claims. There is also no mention of explosions on social media, though hitting a “big underground” ammunition storage would be loud. Bloomberg News cannot independently verify Russia’s reports. 

If the Kinzhal was used, it travels at Mach 10 speeds (or about 7,672 mph) in an unpredictable flight path, making it near impossible for the most advanced missile defense shields to shoot down. 

Here’s unconfirmed footage of what could be the Kinzhal. 

Allegedly footage of Russian Kh-47M2 “Kinzhal” hypersonic missile launched today against of the Ukrainian armed forces underground weapons depot in Deliatyn. pic.twitter.com/9cHgmiKmni

— Harry Boone (@Harry_Boone) March 19, 2022

The advanced weaponry was unveiled by Russian President Vladimir Putin in 2018 and is air-launched from Tu-22M3 bombers or MiG-31K interceptors.

Russia has prided itself on hypersonics (read: here & here), becoming the global leader in hypersonic missiles. The new weapon is so advanced that even the US has yet to field because it has suffered many setbacks in the development phase. 

When defending North America against Russian and Chinese hypersonic missiles, NORAD commander Gen. Glen VanHerck told CTVNews, “hypersonic weapons are extremely difficult to detect and counter given these weapons’ speed, maneuverability, low flight paths, and unpredictable trajectories.” 

With that being said, VanHerck added: “Hypersonic weapons challenge NORAD’s ability to provide threat warning and attack assessments for Canada and the United States.” 

Authored by Paul Joseph Watson via Summit News,

After a surge in COVID cases caused by the BA.2 Omicron sub-variant, Austria is set to re-impose mask mandates that were dropped just two weeks ago.

And there you were thinking the technocrats had finally let it go.

Mask mandates in every area of the country apart from the capital Vienna were lifted as part of the general continent-wide trend of finally learning to “live with COVID.”

That included ending the requirement for Austrians to show proof of vaccination or a negative test to enter most premises.

However, despite the BA.2 variant proving even less dangerous than the original Omicron variant in terms of hospitalisations and deaths, restrictions are being brought back.

“Austria to reintroduce mandatory mask mandates in most indoor settings starting next week, just two weeks after the requirement was abolished,” reports Disclose.tv.

JUST IN – Austria to reintroduce mandatory mask mandates in most indoor settings starting next week, just two weeks after the requirement was abolished.

— Disclose.tv (@disclosetv) March 18, 2022

Vienna Mayor Michael Ludwig has also announced that new restrictions will be imposed on hospitals, which will allow only one patient to visit at a time.

Ludwig has also refused to follow the national government’s decision to drop mask mandates, which will remain in place.

Members of Austria’s national COVID crisis coordination team (GECKO) may also be forced to resign due to apparent “anger” at the national government’s decision to end all restrictions earlier this month.

“Some people are feeling high levels of resentment at Gecko,” said molecular biologist Andreas Bergthaler.

Maybe someone should explain to them that there is absolutely zero correlation between the lifting of lockdown rules and a spike in COVID cases or any real world evidence that masks work to reduce infection levels.

As we highlighted earlier, Dr. Anthony Fauci is also refusing to rule out new lockdown measures in the US despite admitting the new sub-variant’s mortality rate is even lower than the original strain.

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For weeks, we’ve detailed how Russia’s invasion of Ukraine has sparked one of the most significant commodity shocks the world has ever experienced. It even supersedes changes to commodity markets in the 1970s and involves every commodity from grain to fertilizer to crude to metals. 

In a series of charts (provided by Bloomberg), we will show just how the Ukrainian conflict and Western sanctions on Russia are choking the world’s supply of natural resources, driving up prices. 

Russia is a top exporter of many commodities.

Here is the share of Russian exports for each region of the world. The U.S. and allies implementing bans on Russian crude and other commodity exports have disrupted global trade and unleashed supply constraint fears (here’s why banning Russian crude imports is risky). 

Anyone who has filled up their fossil fuel vehicle has noticed prices at the pump have soared since the invasion. That’s because Russia is the second-largest crude exporter globally, behind Saudi Arabia. The U.S., U.K., and Canada have banned imports of Russian imports, sending energy markets into turmoil. 

China, Germany, Poland, and the Netherlands are some of the top regions that receive Russian crude. Any loss of oil will impact refineries and their ability to produce crude products. 

Russia is the second-largest exporter of gasoline and diesel, right behind the U.S. Their largest export market is Europe. 

France, Germany, Turkey, and the U.K. guzzle the most Russian gasoline and diesel per day by volume. A supply shock has already caused soaring prices and shortages as European countries shun purchases from Russia. 

Russia also happens to be the largest exporter of natural gas. Most of it ends up in Europe. Moscow has already threatened to cut supply as European leaders search for suppliers elsewhere. 

Germany is the largest receiving country of Russian natgas through pipelines. 

Russia is third in the world for thermal coal exports used in power plants. Europe is the largest buyer of Russian coal. 

Here are the largest buyers of Russian thermal coal. 

When it comes to agricultural exports, Russian wheat is exported worldwide. Russia and Ukraine have halted wheat exports that will impact global food supplies. The outcome could be an imminent starvation crisis. One could also be brewing in the US. 

As for edible oils, Russia is the second-biggest shipper of sunflower oil. 

Russia is also a top supplier of fertilizer. Moscow has reduced or halted nutrient exports. 

A decline in fertilizer exports will make it harder for farmers in Europe, South America, and Asia to have robust harvests this year that could strain the global food supply even more. 

Russia is a key supplier of industrial and precious metals. It’s among the top players in exporting nickel, a critical metal for electric car batteries. China, Europe, and the U.S. are the largest buyers of Russian nickel. Tesla has raised car prices twice in the last few weeks because of soaring nickel prices. 

Most of the world relies on Russian aluminum. 

Russia is the second largest exporter of palladium and platinum in the world. 

The US, UK, Japan, and Hong Kong are the top importers of Russian palladium, used primarily in catalytic converters for automobiles. 

Russia is also the world’s third-largest steel exporter. 

The West trying to isolate Russia from the global economy with devastating sanctions and restrict its trade worldwide produces unimaginable inflation that could send the world into a stagflationary hellhole (the US bond market is warning about impending doom). Shortages of commodities could develop as prices skyrocket.

Could all of these disruptions suggest the next world war has begun? Billionaire Bill Ackman thinks so. 

Authored by Nick Cobrishley via NakedCapitalism.com,

Like the Trudeau government, Pedro Sánchez’s ruling coalition blames the truckers’ strike on far-right elements while blaming Putin for record-high gas prices and decades-high inflation in Spain.

Spain’s already struggling economy is in a bind after an indefinite strike by truck drivers has brought a number of key industries to a halt. Called by the Platform for the Defense of Road Transport of Merchandise, the strike began on Monday and is being followed by an estimated 85% of smaller truck companies and self-employed truckers. They are protesting surging fuel prices, unfair competition by larger companies and poor working conditions.

Growing Shortages

By Trending Stock News ReportLarge logistics hubs such as Mercamadrid have been operating at half capacity for the past three days, with a drop of as much as 60% in the arrival of products such as fruit, vegetables, fish and shellfish. In Catalonia, where I’m writing this from, the problems seem to be less pronounced. Barcelona’s wholesale market Mercabarna has been receiving 11% less fish and 33% less vegetables, in particular eggplant, zucchini and peppers. As one might expect, panic buying has also exacerbated the shortages.

The main flashpoints are in southern and northern parts of the country, in regions such as Galicia and Andalusia. Some Cantabrian fishing fleets announced on Tuesday that they would halt their activity altogether as there was no way of guaranteeing that their haul would make it to market. The same is happening with fruit growers in the south of Spain. On Wednesday afternoon, the dairy industry confirmed that it will stop working as of Thursday because it cannot supply itself or distribute its products.

Some factories have also been forced to close due to a shortage of components. They include a sugar refinery belonging to Azucarera in Jerez de la Frontera and two steel manufacturing plants, one belonging to Arcelor Mittal in Asturias and the other to Acerinox in Los Barrios (Cádiz). An Opel factory in Zaragoza has also stopped its Line 1, where the Citroën C3 Aircross and the Opel Crossland are assembled, due to supply problems.

Ports have also been hit hard, as wsws reports:

Throughout Spain, major ports are not fully functioning. The port of Bilbao, one of the main entry points in northern Spain, is paralysed. “By road, no commodity is leaving the port of Bilbao, no one works in Santurtzi, the port is stopped 100 percent. No truck is loading,” a spokesperson for the Association of Self-Employed Carriers of the port of Bilbao told news agency EFE.

In Algeciras port, one of the world’s busiest transshipment hubs, the Algeciras Bay Container Transport Association, with a fleet of 1,000 trucks, is supporting the strike.

Pickets have taken place outside key logistics hubs, preventing non-striking truckers from reaching their pickup point. In some places violence has erupted. According to El Mundo, 1,700 trucks had already been vandalized by Thursday afternoon. At a picket line in the industrial zone in San Fernando de Henares, Madrid, two strikers were reportedly injured, one seriously, after an undercover policeman opened fire when one of them resisted arrest. The striker, aged 33, was rushed to hospital in serious condition with a gunshot wound to his abdomen.

The Sánchez government has responded to the crisis by bolstering security at logistics centers across Spain and reinforcing police units on the country’s road network to guarantee the supply of essential goods and the right to work of carriers who do not support the strike. In total, the Government has deployed 24,000 additional police officers.

It is also following the by now dog-eared script of painting all the protestors as far-right agitators. It is the same playbook used by the Trudeau government in Canada against the so-called freedom truckers, as well as the governments of France, Germany, Austria and Italy against the anti-vaccine passport movements in their respective countries.

Sánchez has referred to the members of the Platform for the Defense of Road Transport of Merchandise as “ultras who are replacing the spoken word with sticks, nails and stones.” According to the Minister of Transport, Mobility and Urban Agenda, Raquel Sánchez, the strike is not having much impact while “it is quite clear” that Spain’s resurgent far-right political party VOX is behind the movement.

The organizers behind the platform deny the allegations. But Spain’s far-right party VOX is lending its support to the movement. Whether this is out of pure political opportunism on the part of VOX or something more sinister is at work is hard to ascertain. Support for VOX, which has already participated in a number of coalition governments at the city and regional level, is on the rise while support for the PSOE’s junior partner in government, PODEMOS, is on the decline. As economic conditions deteriorate in Spain, the chances of a right-wing coalition including VOX winning the next elections, in 2023, will grow.

One thing that is clear is that the strikers have plenty of justifiable grievances, the most notable of which are record-high petrol prices and decades-high inflation. The trucker industry is exceptionally vulnerable to sharp rises in fuel prices. At many gas stations gasoline prices have already crossed the 2 euros a liter threshold. In February, the consumer price index in Spain clocked in at 7.6%, the highest level in 33 years and higher than just about any other Western European country with the exception of Belgium.

Blaming Putin for Everything

Sánchez recently took a leaf out of Joe Biden and Nancy Pelosi’s book by trying to pin all the blame for surging energy prices on Russia’s invasion of Ukraine. “We have to tell the truth and not confuse citizens. Inflation and rising energy prices are the sole responsibility of Vladimir Putin and his illegal war in Ukraine,” he told parliament.

It is a desperate, intelligence-insulting ruse and as far as I can tell most people are not buying it. As the graph below (courtesy of Trading Economics) shows, Spain’s consumer price index CPI has been rising steadily since early 2021, a full year before Russia’s invasion of Ukraine:

The PSOE-Podemos government is also escalating the use of violence against striking truckers, just months after deploying armored cars and rubber bullet-firing police squads against striking metalworkers in Cadiz.

The truckers are not just riled about rising fuel prices. As one trucker told me, freelance drivers just can’t compete with the larger companies, which can stockpile fuel and get big discounts on spare parts. Meanwhile the freelancers and smaller companies pay full whack. This allows larger companies to offer lower rates, pricing smaller companies out of the market. Here’s a brief selection of some of the truckers’ other demands:

• A blanket prohibition of the contracting of good transport services (by road) at below operating costs. This is to try to prevent larger companies from pricing smaller operators out of the market.

• Limit the subcontracting of the transportation contracts to a single contractor. Establish direct liability to the main shipper in case of non-payment of services to the carrier, giving arbitration boards the legal capacity to exercise direct action against the main shipper.

• Maximum payment term of 30 days for transportation services, by law.

• Prohibition by law of the loading and unloading by truck owner operators and freelancers who drive their vehicles.

• A new law requiring and limiting the loading and unloading of trucks to a maximum time of 1 hour from arrival, or from the agreed time.

• Legislation prohibiting large road haulage companies from hiring bogus self employed workers (i.e. workers who only work for one company but are treated as freelancers) to drive their trucks.

• Construction of new rest areas that cater to the current flow of vehicles throughout the road network. It is inadmissible that sanctions are being imposed for exceeding driving times, when the reason for said excess is motivated by the lack of safe places to take breaks.

Small businesses and self-employed workers, not just in Spain but across advanced economies, have been at the sharp end of the economic impact of the lockdowns and their myriad knock-on effects. Now, their margins are being squeezed ever tighter by rising inflation while procuring many basic goods is becoming more and more difficult. The story differs from country to country, depending on the extent to which the government in place has supported small businesses and the self-employed through the lockdowns.

In Spain, the support was minimal and largely consisted of emergency loans. According to a recent report by the Bank of Spain, more than a third of self-employed workers lost 46% of their earnings during the first year of the pandemic and had only managed to recoup 17% of those earnings by November 2021. Earnings for small businesses, many of them in the tourism and hospitality sector, slumped by €60 billion in 2020 due to the pandemic.

Many small businesses have had to take on new debt just to weather the lockdowns and now face an uphill climb trying to pay it all back. It’s a similar story in the UK, where a third of small businesses are now classed as highly indebted, more than twice the number before the COVID-19 pandemic, according to the Bank of England.

To compound matters, many governments are beginning to hike taxes or social security on small businesses and self-employed workers. In Spain, any self-employed worker earning more than €1,100 a month will soon have to pay a lot more in social security contributions.

This is the crux: as prices of energy and basic goods surge into the stratosphere, cash-starved governments are increasing taxes and/or social security contributions for many self employed workers and small businesses. For many, it could be the final straw.