This Article is From May 14, 2022

Supply Chain Pressure To Persist, Leading To Permanent Changes In Trade: ING

Global supply chains pressure will persist through 2022, say senior economists and head of commodities strategy at ING.

Supply Chain Pressure To Persist, Leading To Permanent Changes In Trade: ING

Global supply chains pressure will persist through 2022: ING Economists

The pandemic-led already-distorted global supply chains have been disrupted further by the Russia-Ukraine war and that pressure will persist through 2022, say senior economists and head of commodities strategy at ING.

Here Are The Top Quotes On Supply Chains And Trade From ING's Economists:

  1. "Improvement in supply chains unlikely to last with the war and zero Covid-policy: Global merchandise trade faces many headwinds this year. Although global schedule reliability, tracked by Sea-Intelligence, continues to improve slowly, reaching 35.9 per cent in March, compared to 34.4 per cent the month before, it remains below 2021 levels. And don't forget that while congestion data for March captures the early effects of the war in Ukraine, it does not reflect the lockdown in Shanghai."

  2. "With traffic jams having increased significantly in Chinese ports due to the zero-Covid policy in China, and in the North Sea due to the war in Ukraine, we don't expect global schedule reliability to improve much further from here just yet. As for the North Sea region, sanctions on Russia, as well as voluntary bans, are leading to new congestion, suggesting longer-lasting problems for supply chains as sailing and air freight schemes must be reorganised, resulting in longer transportation times."

  3. "Impact of long lockdown in largest global port and export area will be seen in other parts of the world later: While congestion at the L.A. Longbeach bottleneck on the US West Coast improved noticeably in the first months of the year, we expect pressure to mount again in the next couple of months due to the increasing number of vessels waiting to berth outside Chinese ports, particularly in Shanghai." 

  4. "Shortages of inputs and labour add to the problem: Material and labour shortages continue to hinder production and transport as well. This adds to existing material bottlenecks caused by the pandemic, while sharply increased prices make it difficult for manufacturers to calculate accurately for this year and to commit to prices for delivery to clients much later." 

  5. "Permanent trade flow shifts face bumpy transition phase: As a result of the war in Ukraine, we believe that trade flows will be significantly reshaped as market players who previously purchased commodities and goods from Russia look for alternatives. However, it is not possible to compensate for everything and supply in other regions cannot always go up instantly. Overall, we expect trade flows from Russia to Western countries which have sanctioned Russia to be ceased permanently, with some Asian, African and Southern American countries compensating for the loss of Western exports." 

  6. "The EU's proposed ban on Russian oil would be significant for global markets: The EU is the largest destination for Russian oil, importing around 2.3m b/d in 2021, which is equivalent to around 26 per cent of total EU crude oil imports. A phasing out of Russian oil would mean that European buyers have time to look for alternative sources, and so allowing for a more orderly change in trade flows."  

  7. "Trade routes – temporary bypass: The Black Sea region is not only the ‘breadbasket' region, but is also one of 14 global chokepoints, as identified by Chatham House, where exceptional amounts of global food pass through. With Ukrainian ports being closed to the war, it is currently extremely difficult to get grain exports through this route."

  8. "More self-sufficiency wanted – but economically not needed and a time-consuming process: Another trend, which will now gain further momentum, is the shift towards more self-sufficiency. Yet, although headline-grabbing, the shift towards more self-sufficiency is unlikely to show up in trade numbers for the time being as, so far, this has affected only some areas deemed critical, such as microchips or certain commodities. Also, this trend is more of a long-term story, as it takes a great deal of time to set up new industry branches. China has been on this path for years."

  9. "Ultimately, the war in Ukraine might result in a new world economic order, being characterised by more ‘friendshoring' as labelled by US Treasury Secretary Janet Yellen – trading relationships with countries who have long-standing relationships, cooperation and share similar values might become more valuable. Ethics may also become a more important consideration in trading."

  10. "Overall, conditions for international trade remain very tough and the low costs and perceived low risks (both political, and logistical) which helped to support the development of global supply chains have become sources of uncertainty. However, these supply chains remain intact for now. It's more about rerouting, diversification in suppliers and or regions, more stockpiling, and inventory building," they added.

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