LOGISTICS PROBLEMS AND UNCERTAINTY CONTINUES

Where to start? The war in the Ukraine, the summer heat in Europe and Asia, drought and flooding, labour issues, COVID-19 re-emerging dramatically, declining economic growth rates. etc., the list is almost endless. The transportation chain struggles to manage.

Congestion at container ports is showing little sign of easing as labour shortages are crippling the availability of enough manpower to clear ports and to deliver import and export boxes. Added to this, labour negotiations are not going exactly to plan in the major ports of Northern Europe and the US West Coast. Delays due to congestion or waiting at ports are increasing round voyage time by 2-3 weeks which effectively takes a large amount of capacity out of the system. Should anyone be surprised that freight rates have not come down any further from their peaks and are in fact stabilising at relatively high levels.

The uncertainties of supplies of oil, gas and grains has caused a ripple effect in inflation which is rising rapidly to 10 per cent and beyond. Germany, heavily dependent on the flow of gas and oil from Russia, has been worst hit. In the meantime, China’s COVID-19 zero tolerance policy has slashed economic growth to a level of 0.4 per cent. The impact of this slowdown in economic output has hit nations importing goods and components badly with repercussions in industrial output. GDP growth rates are being cut in the EU and the US for 2022 and further decline projected in 2023. Does this mean a recession is looming? As noted before, the judgement on that is still out but one thing is certain, economic growth is slowing as inflation rises and a recession cannot be ruled out.

Not only the container shipping industry is being hit, but also the bulk trades as Chinese demand for oil, gas and coal has been declining creating excess capacity and falling charter-hire rates. The impact on ports is being felt globally as ships drop port calls, be it for labour unrest, lack of truck drivers or diminishing volumes of goods. The short to medium term future does not look good as the uncertainty continues into 2023.