Supply chain pains – five major problems impacting international trade today – The Institute of Export and International Trade
Supply chain pains – five major problems impacting international trade today
09 August 2021
(0 Comments)Posted by: William Barns-Graham
The pandemic has thrown several challenges at international traders, while the UK’s departure from the EU has also been a complicating factor.
As several countries continue to emerge from the worst of the pandemic, what obstacles now lie in wait for exporters and importers?
Here, the IOE&IT Daily Update looks at the five main supply chain issues in global trade today.
1: Shipping rates
Shipping rates have continued to soar since the pandemic, with the jamming of the Ever Given ship in the Suez Canal in March and a surge of Covid-19 cases closing off southern Chinese ports in June among the contributing factors.
Spot container rates for transport from Asia to Europe have gone from $2,000 to $13,000 due to a perfect storm of disruption at ports – including container shortages, pandemic closures, a lack of drivers, soaring demand, and an increasingly cutthroat market, reports the Telegraph.
According to Lloyds Loading List, contract rates are following suit with July seeing them climb by close to one third – the largest ever monthly increase.
Despite around 300 new vessels being on order, there seems little prospect of relief for shippers in the short term.
Severe weather conditions have also played their part.
Flooding in mainland Europe last week cut rail links and shortfalls have been predicted by suppliers of specialised parts for the auto, technology and aerospace industries, reports CNBC.
Typhoons in China have affected Yantian port in Shenzhen. This comes two weeks after Shanghai’s Yangshan mega-terminal facility and nearby ports evacuated ships because of flooding bought about by Typhoon In-Fa, according to Bloomberg.
Captain Andrew Kinsey, a marine risk consultant, told AGCS that climate change volatility is increasingly impacting shipping and logistics.
“Weather is no longer seasonal. Year round we see tornadoes, hurricanes, floods and storms affecting shipping and inland marine, as well as associated infrastructure. Almost every mode of transport is affected, with a knock-on effect for supply chains,” he said.
3: Covid in Asia
A record surge of Covid-19 infections has forced factories to shut in southern Vietnam, hitting one of the world’s busiest manufacturing centres for clothing and footwear, reports the FT.
Taiwan’s Pou Chen, which makes shoes for Adidas and Nike, stopped production at its Ho Chi Minh City factory on 14 July until at least 9 August. South Korea’s Changshin also suspended operations last month.
According to Bloomberg, Asian countries that successfully dealt with earlier waves of infection are locking down as the Delta variant is leading to higher death rates.
Nikkei Asia reports factory shutdowns by Toyota in Thailand, business restrictions in Malaysia and Toshiba ordering Indonesian staff to work from home.
4: Air capacity going down as air passengers go up
Airlines that switched to carrying freight when passenger numbers fell off the cliff at the height of the pandemic are now prioritising passengers as restrictions loosen, reports Lloyds Loading List.
Flexport’s global head of air freight, Neel Jones Shah, told a webinar that, for the period 29 June to 12 July, global air freight capacity was down 12% compared to the same timeframe in 2019.
Carriers told the Loadstar that they were also being affected by labour shortages at European airports with airlines switching their flights away from the worst impacted airports.
The situation is exacerbated by the continued use of ‘preighters’ – passenger planes that have been reassigned to carry freight – as these take longer to unload, meaning airports are reluctant to accept them.
5: Driver shortage
According to the Telegraph, the army is on standby to help supermarkets through the ongoing HGV driver shortage.
Around 2,000 army drivers with HGV licences are waiting to help maintain deliveries of foodstuffs and medicines ahead of a potential pinch point next month as workplaces re-open and schools return.
The government has announced measures to alleviate the estimated shortfall of 100,000 drivers, reported IOE&IT Daily Update, but has stopped short of issuing short term visas to entice European drivers back to the UK.