Easing the supply chain crisis, but the ports are as bad as ever

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Welcome to the Trade Secrets website. The crisis in the supply networks, or at least the container shipping part of it, is receding very quickly, and the deprivation is sure to soon be remembered with a sort of rushing nostalgia, a copy in time of those people who lived through the great age. depression and never shut up about it. Clogged ports, fully laden container ships twiddling their thumbs at sea, the word “fragility” becoming obligatory in all discussions of globalization in English-language publications around the world, all fading into bittersweet memories. Today I ask if we have taken the opportunity to develop logistics infrastructure and increase capacity for the future. suspended water Sees the impact of the dollar’s decline.

container congestion

As I argued recently, it appears to be great news that over the past few months container traffic has been congesting like penicillin-encrusted sinuses. Delivery times, shipping rates, wait times — they’re all declining, though some shortages remain for semiconductors and other important commodities.

Unfortunately, this is all due to bad times for the global economy and thus commodity trade, which tends to move with global GDP, but with greater fluctuations. Those who considered the leads more about an extraordinary surge in consumer durables demand after the Covid-19 lockdown lifted (more e-bikes, fewer Netflix subs), rather than deeper structural problems, are doing a qualifying job. Victory dance.

I say it qualifies because when consumer demand emerges from the cyclical downturn, if there is another spike in consumption of durables, it is conceivable that the ports will clog again. So, have governments and shipping companies done anything to prevent this? Is the communication between container terminals and land transport smoother, and container flow management greatly improved?

I asked two relevant experts: Ryan Petersen, CEO of freight forwarders and logistics company Flexport, one of the industry’s sharpest observers during the crisis, and John Butler, president and CEO of the World Shipping Council, which represents the world’s container shipping lines. .

Answer: No. “We haven’t learned anything,” Petersen said. “We’d like to think we’re starting to run things more efficiently and solve our infrastructure bottlenecks so that we can handle the surge in demand, but in fact no. Demand has fallen, and that’s it.”

Supply chain managers have worked miracles to try to keep things moving, shifting container traffic from one port to another or moving goods between planes and trucks. But they operate within a largely unchanged infrastructure.

Petersen is particularly critical of the US West Coast ports of Long Beach and Los Angeles, which together handle about a third of US container trade. Flexport itself pioneered a mobile application that allows truck drivers to quickly connect to the next available container. But broader problems with the ports – size, technology and poor road and rail connectivity – remain.

Port management tried some quick fixes, but they didn’t achieve much. Labor unions, after convincing US President Joe Biden, agreed to run a 24-hour shift in Los Angeles. However, only two charges appeared during the night.

Butler agrees with Petersen that there have been few structural improvements. Domestic destinations, warehouses and distribution centers are usually not open 24/7. It’s no use going to the port, picking up the box, and then going to sit outside the warehouse until the sun comes up.”

So why hasn’t more capacity been built? For port and infrastructure infrastructure, Petersen says, “If you commit the money now, by the time you start it will be two years. Maybe by the time you finish that, maybe a decade will pass.” California, due to its desire to protect its coastline, is the least building-friendly US state.

Certainly a lot of container ships are being built, with order books at record levels. But this is quite typical of a demand cycle, and in fact there is a high probability of a glut a year or two from now.

“Nothing is static in this industry,” says Butler, “but generally when you take out the disruptions of nature that we’ve seen during Covid, I think you’ll see a market that looks a lot like we had before.”

Meanwhile, some authorities are heading in a different direction, looking for someone to blame. The European Commission is investigating whether the shipping industry’s unquestioned focus and long-established practices such as “ship-sharing,” where a ship is owned or operated by multiple carriers, are anti-competitive.

For Butler, that’s just a scapegoat: “There’s clearly a lot of political anxiety around supply chain disruptions that have occurred during Covid, which tends to manifest itself in essentially different entities that take every possible opportunity to express their displeasure.” In any event, it will be increasingly difficult to make a case about freight line clusters driving up rates if there is overcapacity and freight rates continue to fall.

So here’s the story about supply chain hacks. It’s gone for the foreseeable future, it was mainly about consumer demand, nothing has been done to improve the infrastructure and it’s not clear what will be needed anyway. Happy Thanksgiving this week to those who celebrate.

In addition to this newsletter, I write the Trade Secrets column for FT.com every Thursday. Click here to read the latest and visit ft.com/trade-secrets To see all my previous columns and newsletters too.

suspended water

The US dollar is declining. Is this good news for the global economy? The strong dollar was contributing to inflationary pressure in smaller countries and adding to debt sustainability problems for companies and countries that had previously borrowed heavily in greenbacks. The strong dollar has also been a $10 billion problem for US companies because of its impact on foreign sales revenue.

The line graph of the dollar index shows the decline in the US dollar from its highest levels in 20 years

There may now be fewer Americans booking vacations to Europe because of the added cost of the less generous exchange rate. Other national governments will take some relief from their recent exposure. As Martin Wolf, chief economic commentator for the Financial Times, pointed out recently, the US dollar was strong because the global economy was in trouble. Only then, when the economic tide has receded, do we discover who has been swimming naked. (Jonathan Moles)

Truly remarkable work by a star group of FT colleagues on how European companies were lured by cheaper energy costs and federal dollars to move to the US, and the resulting anxiety in Brussels, Paris and Berlin.

The dollar has fallen precipitously over the past two weeks as expectations of a US interest rate hike have receded, which would be relief for those middle-income countries that are heavily indebted in dollars, and indeed most of the world in general.

Politico’s Stuart Lau argues that Xi Jinping has been trying to defuse the fight in the EU over trade by playing member states against each other and the Commission. (Lots of countries have tried this but you have to have a very large economy to succeed).

The American Prospect says (disagreeingly, given its left-wing editorial stance) that despite all the talk of decoupling, American companies remain deeply engaged in China.


Trade secrets from the editor Jonathan Molds


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