This Week in SCDigest

As just a couple of examples of this outside of energy, you probably have heard of the collapse of steel prices, which have fallen by two-thirds since the $600 per ton level reached in early 2011 to about $200 today, as you can see here. Brutal. In June of 2008, the price was about $1265 - an amazing six times today's prices.

I don't have a chart, but many agricultural prices are also in the toilet. For example, wheat was $361 per metric ton in late 2012. It is now down more about 55% since then, at $164. It saw its all-time high of $439 in June of 2008 - nearly three times the current price.

Most of us know container shipping rates have also cratered, reaching modern all-time lows late in 2015, below variable costs to operate a ship and down by about 50% from 2012 levels, as you can see in the chart here that tracks the China Containerized Freight Index.

What the hell is happening? Other things of course have held up - trucking and rail rates, for example, and thankfully wages for the most part.

But all this is wreaking much havoc, even if sometimes that pain is out of direct view. Oil-focused countries - most notably Russia - are facing economic disaster, and who knows what that will lead to. Commodity-dependent Canada quietly went into recession last year, and Brazil's economy is a mess. The whole US oil-natural gas fracking sector is in jeopardy - the growth of which had been a key factor in reaching just the modest 2% GDP growth we've seen in recent years.

The container shipping industry is madly consolidating. Bulk container lines are selling any asset they can just to "stay afloat" financially.

Steel giant ArcelorMittal lost $7.9 billion in 2015. Steel companies around the globe have been rapidly shedding workers. Steel sector employees - blue collar, managers, executives - just recently staged a mass march in Brussels to protest low cost Chinese imports they blame for the price collapse.

An article last week in the Farm Journal was headlined "Dilemma for U.S. Farmers: Which Crop Will Lose the Least Money?" Meanwhile,mining and agriculture woes are taking down great equipment companies like Caterpillar and Deere.

There are myriad and varying factors in all this, from a slowdown in Chinese demand (number one source of blame for most observers) to a strong US dollar to insane capacity growth in the shipping industry, etc.

But for the years before mid-2008, the corporate concern was on ever rising "input and logistics costs," often blamed for missing earnings targets.

Now, this scenario is simply turned on its head - and again, all this in decent economic times. What will happen if we do slide into recession? Could it get even uglier?

While lower gas costs are great for consumers, and lower input costs great for some (but certainly not all) businesses, I have to wonder if the markets - with prices worse than the bottom of the Great Recession - aren't telling us that an economic slowdown is indeed coming.

Maybe it is just supply and demand at its most brutal, but we've never seen prices collapse like this in relatively good economic conditions in our lifetimes.

What is your take on these collapsing prices? Good or bad thing? Do you think it is signaling coming economic weakness? Where do you see things going from here? Let us know your thoughts at the Feedback section below.

As someone who works for Amazon Global Logistics, I won't comment on the specifics in the Bloomberg article but what I will comment on is this: Amazon is committed to providing customers, regardless of their geographic location, with exceptional value, selection, and experience.

What we have identified within Amazon is that without an optimized end-to-end global supply chain ecosystem, and flawless logistics execution, we simply cannot meet our goals. Individuals who are passionate about all aspects of supply chain management, logistics, retail, and technology innovation, and who have a desire to make history, should explore career opportunities at Amazon. The challenges we have before us are enormous but for our Sellers, customers, and associates, the challenges will be overcome.

Brittain Ladd
Amazon Global Logistics

Of course this sort of "Vertical Integration" makes total sense. Why would any large company not want to control, and squeeze efficiencies from all parts of its supply chain. However we have seen many failed attempts in the past, think Ford River Rouge – perhaps companies get too atomic to control effectively - but most of those failures occurred before we had the real-time visibility to monitor everything globally that we have today with the internet.

Time will tell. My bet is that regulators in the various countries will provide Amazon with too much pain to allow them to achieve their grand vision. Competitors will be urging regulators to deny various options, and unless all of the pieces are in place from source to consumer the Tower of Amazon's Bable may collapse. Or maybe the genius team at Amazon will simple make a variant of the plan succeed.

Steve Murray