Force majeure is essentially a “not my fault” notice oil companies send when they physically can’t deliver.
Middle Eastern suppliers are sending FM notices to clients in SK, JP, and India. Without FM, they’d owe clients the difference between contract price ($70) and spot ($120+) per barrel. With FM, the client pays the difference.
Of course some of the upstream companies will declare FM as well like a fertilizer company which says it can’t deliver due to the lack of oil, but these cases get progressively weaker as they aren’t as strong in the definition of “not possible” – because it is possible for the fert company to get oil, just more expensive.
If Hormuz stays closed past ~45 days from Feb 28 (2 weeks from now), termination clocks expire and mid-chain companies like fertilizer distributors, regional food manufacturers, and leveraged commodity traders get crushed. They’re locked into fixed-price contracts but paying spot for inputs, with no working capital to bridge the gap.
For industries that can pass costs down, the consumer eats spot prices. For staples, that’s politically impossible since governments cap prices. So manufacturers eat the margin instead.
TL;DR: Hormuz opens fast, or we see a wave of defaults in fixed-contract mid-chain industries and inflation everywhere else.
Is no one here concerned about Force majeure?
byu/orange-heroin inwallstreetbets
Posted by orange-heroin
18 Comments
No one involved with the markets knows how actual businesses make money or lose money and the people in charge of it all have never had a job in their lives
Edit: No one is worried about it, good luck out there
It’s pure bullshit if they can’t deliver.
I own a lot of silver so if they admit comex is a ponzi ill make a lot of money so whatever..
Can we use during the closing of robinhood accounts? If so, I am concerned about force majeure.
where have u been. there’s been endless force majeure declared everywhere already
This fear has actually been cited by airline mgmt as a reason to shy away from hedging. I think it was UAL’s CEO (maybe AAL?) who basically said the catastrophe scenarios they would hedge for might be worthless if the event actually materializes.
Force majeure is just a prelude to spice melange.
Yes. But perma bulls don’t ever have to think beyond “stonks always go up.” Naturally, a bunch of them bought these dips.
So calls on your puts?
a lot of the regards herein don’t know what fm is, so they’re fine. some of us know what it is, but what you gonna do about it? nothing. so we’re fine. are we concerned? yes we are, but again, what you gonna do about it? adjust your portfolio accordingly and I don’t mean timing and predicting whether if it’s gonna go up or down like a lot of us here do. see the trend and hedge accordingly.
the mid-chain industries are the real ticking time bomb. everyone is watching the oil price, but the margin squeeze on fixed price contracts is where the defaults actually start. 45 days is generous some of these leveraged traders won’t make it past 30 if the banks pull their lines. good luck to anyone holding anything that requires a fertilizer input
Crude just passed the 112 mark, ATH since 2022.
The average person here is the equivalent of a vibes coder
Forced majeure is just explosive diarrhea
I find it ironic that the phrase for economic surrender is in French
My cabbages!
Oil companies gonna delete the app and move on.
I DECLARE FORCE MAJEURE!!!
My calls have been force majuered