Not long ago, shippers were eagerly awaiting the summer of 2022. It was supposed to be when supply chains would begin to unscramble, and the industry would start seeing some semblance of regularity. But Covid’s unrelenting grip on the globe—combined with the war on Ukraine and growing inflation—has shippers tempering their expectations.
As 2022’s peak season approaches, several challenges loom over the horizon. Delays, disruptions, and shortages look to return with renewed force as China’s zero-tolerance Covid policy and the war in Ukraine throw a wrench into already weak supply chains. At the same time, consumer demand is showing signs of cooling down, along with spot rates, which could bring some relief and new challenges.
Significant disruptions in trade flow from Asia to Europe
Just as things were starting to look up for supply chains, Russia’s invasion of Ukraine pulled them back into chaos. The conflict and the ensuing geopolitical tensions have pushed inflation rates across the globe and sent supply chains for essential commodities like food and fuel haywire. Both countries’ position as large commodity exporters has complicated the flow of crucial components like steel and iron, further stressing supply chains for goods like cars and electronics.
Freight routes have suffered too. Land, sea, and air routes crossing through Russia and the Black Sea region are experiencing significant disruptions as shippers and firms turn to alternatives. Freight forwarders have started diverting rail cargo via ocean and air, favoring the former over the latter. An increase in ocean freight volumes could add to the chaos of Europe’s already strained ports and further slow operations during 2022’s peak season.
Port traffic jams and major delays in ocean freight are back
Ports around the globe are bracing themselves for a cascade of disruptions resulting from China’s zero-tolerance policies against Covid-19. As of early May, neither Long Beach nor Rotterdam—America’s and Europe’s largest ports, respectively—are experiencing major changes in traffic coming in from China. But if lockdowns drag on and shipments pile up in China, cargo volumes could become unmanageable once trade resumes and peak season starts.
Although disruptions are not yet at a crisis point, ports are already seeing signs of what’s to come over 2022’s peak season. Delayed inbound ships from China are causing shipping container shortages in Europe—and transpacific shipments to the US are growing lengthier. While the temporary reduction in cargo volumes from China has helped ports on the US West Coast ease congestion, bottlenecks could return over the summer.
Reduced export volumes from China leading to shortages of goods and raw materials
In addition to the looming wave of congested ports, idle factories and lagging land transport in China have reduced export cargo volumes. These factors have ensured shortages of goods and raw materials worldwide and led some manufacturers to decrease capacity or cease operations altogether.
Firms trying to keep up with customer demand and make up for last year’s setbacks project further losses throughout 2022’s peak season and into 2023. Apple, which manufactures its products in China, expects constrained product supplies to cause up to $6 billion in lost sales for the upcoming quarter. And price pressures and input shortages have automakers bracing for decreased production volumes and reduced profits.
Growing concerns over skyrocketing diesel prices
Diesel prices have hit historic highs around the globe. The culprit is a combination of increased demand, constrained output, and Europe’s scramble for alternative energy sources as it turns away from Russia. The increase in spot prices exacerbates inflationary pressures across economies and generates more delays, reduced capacity, and fuel surcharges for shippers.
Overland transport has been particularly hard hit, with truckers struggling to remain profitable due to increased operating costs. Given that diesel fuels nearly every stage of supply chains, it won’t be long before other sectors start feeling the crunch. Supplies will remain tight as refiners readjust production to post-lockdown conditions and a volatile market.
Take on 2022’s peak season challenges with confidence
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