How To Deal With The Global Supply Chain Crisis
With ports clogged, commodity supply slowed and shipping prices soaring, the global supply chain crisis has surfaced in a number of areas, with many pointing the finger of blame at the shipping industry. Patrick Berglund, CEO of maritime price comparison platform Xeneta, believes that COVID-19 has indeed triggered a container crisis, and that the reasons behind it are strong booking activity and limited supply.
But he also points to a deeper reason: when the outbreak occurred, the shipping industry did not have enough infrastructure to cope with the impact of COVID-19. Since then, things have been happening one after another, like a snowball, which has led to increasingly serious supply chain problems.
One of the major events that occurred during the epidemic was the blockage of the Suez Canal. The Suez Canal is the hub of Europe, Asia and Africa, and is one of the major transportation routes between Asia, the global production hub, and Europe, the consumer market. About 13% of the total global shipping volume passes through the Suez Canal, which carries oil, gas and bulk commodity containers.
In March, Taiwan’s EVER GIVEN ultra-large container ships blocked traffic in the Suez Canal for nearly a week, causing container prices to soar further to record levels. But it wasn’t the only major event that drove container prices to record highs.
After monitoring the market, the slow return of empty containers will continue to plague the industry, said McBryant, chairman and CEO of CIMC, the world’s largest container manufacturer. The problem is the poor flow of containers. There are two main reasons: First, the world’s 20 busiest ports are currently in a state of “traffic congestion”, long queues of ships, empty containers can not be shipped back; second is the epidemic led to many countries and regions of economic and industrial activities suspended.
Disruptions in the supply chain could lead to two outcomes in the coming months: the cancellation of commodity exports or higher commodity prices. If this situation continues to develop, commodities will go off the market and then prices will rise.
According to the latest data from S&P Global Market Intelligence, U.S. seaborne containerized cargo imports jumped 47.1% this spring compared to a year earlier, and the plight of logistics companies has not been alleviated. The extent of imports of goods in many sectors continues to rise, with imports of non-essential consumer goods up 88 percent year-over-year last month.
This is driven by a mismatch between supply and demand, Berglund said. The shipping industry, which has been oriented toward making more profits in recent decades, has faced serious problems that have triggered a wave of consolidation, such as the bankruptcy of Hanjin Shipping in 2016. The industry does not have sufficient infrastructure to cope with such shocks.
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