Middle East

The peak of the crisis is the mirage

A line of more than 80 container vessels waiting to berth at the ports of Los Angeles and Long Beach, California was cut in half in late November. It turns out that the ship that disappeared from the queue was simply hiding from it, wandering the Pacific Ocean out of the reach of official numbers.

The actual bottleneck in the middle of the week was 96 ships. Repeated themes in the German-to-US economy proved that progress in repairing this supply growl was a mirage. In a year of supply chain decline, logistics experts struggle to distinguish between the light of true improvement and the false dawn. Even if optimists prove right in detecting peaks in traffic, the fragile global trading system faces additional months of pain and the risk of even one unexpected shock collapsing again. there is.

Jennifer Bisceglie, CEO of Interos, a supply chain risk management company based in Arlington, Virginia, said: She believes it will be a transition from 18 to 24 months to return to normal, as companies are tackling pandemic challenges and working to strengthen their supplier networks through digitalization. Among the early signs of a turnaround was the Oxford Economic Report released last month, showing that supply chain stress in the United States was eased in November. However, the fallout from the new coronavirus mutant, which caused another limitation prior to the Christmas travel season, “has the risk of slowing the pace at which supply chain problems are resolved and the progress achieved so far. There is a possibility of unwinding. “

Oren Crackin, head of the US Economist at Oxford Economics, said: “The situation is very fluid and Omicron variants can exacerbate the situation.”

Invisible relief
The monthly US Logistics Managers Index, released in early December, also showed little normal movement. The main gauge rose for two months in November. This reflects record warehouse costs and higher inventory and shipping costs. Respondents to the LMI survey do not expect significant relief in the next 12 months.

Zack Rogers, an assistant professor at Colorado State University’s Business College, helping edit the LMI, said the worst was probably over with a mismatch between logistics capabilities and demand.

Still, he warns that going through the bottom doesn’t mean that the supply chain is clear or can’t get back there. Rogers points out the ongoing semiconductor shortage at the heart of the problem. For example, the new Class 8 truck ordered today will not be completed until February 2023. Under normal conditions, “he said. “We weren’t going to wake up on January 1st and suddenly got all the trucks and storage we needed to reduce costs in a meaningful way.”

Marine transport
Due to capacity constraints, sea freight rates remain high. The price of a 40-foot container from China to the west coast of the United States rose to $ 14,825 in early December, according to Freightos data, including additional charges and insurance premiums. That’s a 28% reduction from the $ 20,586 record achieved in September, but it’s still more than 10 times the cost of December 2019.

For many observers, the fees to grab these headlines reflect the spot market, and most major retailers and manufacturers are lower than those listed in their annual contracts, which are usually renewed with carriers around April each year. Be careful to pay the fee. According to Xeneta, a marine and air cargo market analysis platform, long-term contract rates for containers are currently rising, rising 16% in November, leading to a 121% year-over-year surge. Patrik Berglund, CEO of Oslo-based Xeneta, said in an online post: “In short, they’ve never had something better than this, but unfortunately many shippers are doing really well.”

Air cargo
Pressure in the air freight market continues relentlessly, and prices are still rising amid demand, partly due to delays and soaring sea freight. As the latest Federal Reserve Beige Book points out, the cost of shipping goods by ship has recently exceeded the cost of airplanes. Therefore, analysts say there is little reason to expect airfares to fall in the short term. Flexport’s senior air cargo manager, Camille Currenton, said last month that demand was “very strong”, leading to backlogs at US and European airports with a delay of two to seven days. Eytan Buchman, Chief Marketing Officer of Freightos, based in Hong Kong, said: , Online freight market. “That doesn’t mean the worst isn’t over.”

European struggle
In the euro area, the Bloomberg Economic Gauge shows that supply conditions are chilling from high levels. Whether that trajectory continues depends on your ability to control the virus. In Germany, a December study showed that reintroduction of regulations to curb virus outbreaks has reduced investor confidence in the current environment to its lowest level in six months.

German manufacturers have been restrained for months by global supply problems. Emphasizing their challenge, data on factory orders showed a much worse slump than any analyst expected. Moreover, consumers are under pressure from the fastest inflation since the early 1990s.

“The continued supply bottleneck weighs heavily on production and retail,” ZEW President Achim Wambach said in a statement. “Lower economic expectations indicate that expectations for much stronger growth have diminished over the next six months.”

UK truck driver shortage
In the UK, the economy is still tackling tensions from packed ports to a shortage of truck drivers. AP Moller-Maersk A / S recently announced that it will skip some container services through the busiest port of Felixstowe, the UK’s busiest container gateway, until March and route UK cargo by shuttle from mainland Europe. Did.

The shortage of truck drivers is probably the number one cause of the UK cargo backlog. Logistics UK said in a December report that the number of drivers for heavy-duty material handling vehicles (HGVs) decreased by 72,000 (24%) between the second quarter of 2019 and 2021.

UK logistics companies are taking steps to enhance training, recruitment and payments. “But there remain concerns that supply chain disruption may continue in 2022 until these key roles are fulfilled across the industry,” the report warns.

https://gulfbusiness.com/supply-chain-woes-crisis-peak-is-a-mirage/ The peak of the crisis is the mirage

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