Last year saw a relentless surge in shipping costs and persistent bottlenecks the world over, disrupting global supply chains and causing what we’ve referred to as the “World of Shortages”. Are bottlenecks set to continue? Four key factors give us some clues – and leave us optimistic.
1. Sea freight rates for container shipping on major trade routes are easing: In January this year, global ocean rates are at 8.6 times their January 2020 levels, down slightly from September 2021 peaks (10 times).
2. The average price paid for dry bulk materials is cooling off: The Baltic Dry Index, which covers more than 20 shipping routes globally, peaked at the 5,000-mark in October 2021, but has fallen sharply since (to 1,290 at the end of January), suggesting some easing.
3. Container throughput at shipping ports is rising: Container volumes at the global top 5 shipping ports further inched up in December, with the exception of the Ningbo Zhoushan port – which faced partial closure in December but will see two new berths launched this year. Container volumes at 4 other key global ports have reached well-above pre-pandemic levels.
4. Delivery times are improving: Forward-looking surveys suggest average suppliers’ delivery times began to drop in December, a tentative sign that goods and labour shortages may be starting to ease.
Much of the above would suggest supply constraints are easing. Whether these improvements suggest an easing of key bottlenecks or reflect better management by key links in global supply chains (shipping operators, port owners, and the like) is yet to be seen. But supply chains aren’t out of the woods yet. The Lunar New Year – and associated factory delays and port closures – will likely weigh on trade. And the threat of new restrictions in response to the spread of the Omicron variant (or worse, an as yet unforeseen variant) remains a key downside risk well into 2022 and reinforces the need for companies to be vigilant and prioritise supply chain resilience and agility.