the reasons behind the world trade jam

The end of the container crisis is not in sight“, he assures Maersk, the most important shipping company in the world. While the Danish company, nicknamed the owner of the seas, publishes its best financial results since 2014, with the last quarter being the most profitable in its history, they don’t seem to see the end of this supply crisis as all companies want to increase their stocks to try to alleviate the effects of the lack of supplies. It is the fish that bites the tail.

The world’s largest shipping company in terms of the number of containers has seen the number of these in circulation grow only 7%, but once in ports, they take time to be unloaded and distributed. It is not just a question of containers, it is a problem of the entire supply chain.

Last year, the world economy came to a standstill. This year she’s hit the ground running again, only to be caught in one of the biggest traffic jams in history.

According to the latest report from Bloomberg EconomicsThe end of the crisis is not seen in the short term, “due to the inability of the world to find a quick solution and how in some regions the crisis of 2021 continues to worsen.”

And the lack of supplies leads to an increase in prices. Supermarkets with empty shelves, ports where ships are stuck far from shore, or car factories where production is slowed by a lack of microchips. In all these cases, the increase in the prices of almost everything is inevitable.

The biggest logistics jam in history

Crisis supplies

Behind the supply chain traffic jam is a mix of overloaded transportation networks, labor shortages at key points where there is a bottleneck, as in US ports, and demand in the United States exceeds pre-pandemic levels. Furthermore, a demand that focuses more on goods than on services.

To top it all, the problem is not just moving products from one part of the world to another. The world keeps trying to make enough as to meet the demand. Manufacturers have been surprised by this year’s revival, having cut raw material orders last year when consumers stopped spending. Now, the raw materials do not arrive on time.

Crisis Supplies

And of course, we cannot forget that the pandemic has not been declared over. For instance, China Faces New Covid-19 Outbreaks and responds with selective lockdowns, often shutting down factories. If you do that, we add your worrying energy crisis (has started ration fuels), it is normal that their factory prices are increasing at an annual rate of 10%, the fastest since the 1990s.

Between one thing and another, in the end, many companies globally see their production slowing down despite strong demand. For instance, Toyota had to reduce its production September by more than a third of 2020 levels, as shortages of supplies, including microchips, paralyzed its famous “just in time”, laid-flow production process. This process, adopted since then by the entire industry, shows its limits in this situation.

When will this crisis end?

Crisis supplies

For global manufacturers like Toyota, as well as companies that move their products around the world, and buyers waiting for deliveries, the big question now is: When will this crisis end?

Shipping conditions should begin to ease after the Chinese New Year in early February, “although the disruptions could last at least until the middle of next year,” Shanella Rajanayagam, a trade economist at HSBC, told Bloomberg. Even so, he does not consider that the crisis will be solved in 2022.

Crisis Supplies

And it is that the pandemic that paralyzed the economy and its sudden reactivation have caused a situation never seen before. The bottlenecks are multiplying throughout the entire production chain, from the supplier of raw materials to the manufacture of the final producer and its subsequent distribution to the final customer.

Until now, the pattern was known. Increased demand boosts trade, driving up the price of transport, logistics companies end up over-increasing their capacity due to the bonanza of the situation, and there is a collapse and a decline. But the pandemic has disrupted this cycle. Even amid signs of slowing growth, the international trade channel has never been more clogged.

“For the supply chain to recover, it will take a certain dose of luck” -avoid meteorological catastrophes or new outbreaks of covid- “as well as time and investment to add more logistical capacity”, says Simon Heaney, research director of Drewry’s containers in London.

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Lenny Li

I started to play with tech since middle school. Smart phones, laptops and gadgets are all about my life. Besides, I am also a big fan of Star War. May the force be with you!

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