In the months ahead, global trade looks likely to continue grappling with the broad-based impact of the war in Ukraine and a covid resurgence in China. We see two main themes weighing heavily on supply chains in the months ahead.
Rising food protectionism: Since the Russian invasion of Ukraine, export curbs have spread globally, adding to food-inflation pressures, and marking another setback for free trade. The number of countries imposing export restrictions on food has gone up from 3 to 23 since March, and by the end of May included 45 separate measures. Governments have been limiting food exports (via actual bans, export licences and taxes) to provide some relief to the local masses from rising prices and to maintain domestic supplies. Russia has for example banned the sale of sugar, sunflower oil, and grains. Indonesia, which produces more than 50% of the world’s palm oil, has stopped its outgoing shipments. India has restricted wheat, with possible additional bans on sugar and rice.
More pressure on shipping to come: We took a closer look at the percentage of global container ship cargo capacity tied up and unable to be loaded or unloaded due to port congestion in sea areas up to 500 kms from major ports worldwide. The data shows a considerable rise in container ships waiting off Shanghai and neighbouring Ningbo-Zhoushan (the world’s third-largest port). Those levels are not as severe as what was seen during the Wuhan lockdown (in early 2020). But they have crossed levels witnessed during Yantian in Shenzhen (in June 2021) and are seemingly approaching the levels during the Ningbo closures in August last year (which sent shipping prices much higher).
Given what’s been said, it’s perhaps unsurprising that we’ve seen supply chain pressures intensify in the Euro area, UK, and China – as our Regional Supply Chain Index (RSCI) below shows.
RSCI: Supply chain pressures intensify in the Euro area, China, and the UK