PORT CONGESTION AND SUPPLY CHAIN DIFFICULTIES PERSIST

Ports in Asia, North America and Europe are suffering from congestion whilst the management of the supply chain inland continues to struggle as lack of labour and capacity cause us to wonder if things will ever improve? Added to this is the Covid Zero policy in China which is playing havoc with the production of goods and their transport to ports.

There are threats posed by labour issues in Asia and Europe, but the U.S. discussions remain cordial between unions and management.

Carriers report a lack of capacity but are being accused of manipulation to keep freight rates high and thereby impacting the inflation rate.

We are in a strange situation where a significant amount of containership capacity is idle (not in service) for various reasons. This does not include the vessels delayed at ports waiting for a berth which are considered in service. At the same time, according to Container Trade Statistics (CTS), there was a 16 per cent drop in global volume between December 2021 and February 2022 which bounced back by March only to begin a decline again in April. Much of this was due to consumer demand in Europe. The American consumer has continued to keep demand fairly high, using government grants and pent-up savings, nevertheless Asian exports dropped over 22 per cent during the Lunar New Year, but much of this was recovered the following month.

There appears to be no solution in sight as port congestion has been easing and labour issues are being addressed in all regions, which leaves the main source of problems related to manpower issues within the transportation supply chain. This was certainly one of the conclusions of a recent Federal Maritime Commission inquiry that took some of the pressure off the carriers (President Biden notwithstanding).

The bulk sector is having issues with surplus capacity as oil demand is dropping as a result of the war in the Ukraine and declining growth in Europe and the U.S. All the signs are that we are headed for a recession by next year as interest rates rise to fight inflation.