Tracking turmoil in global trade

Optimism among US small businesses retreated in October 2022 for the first time in four months as the sales outlook worsened, but there were glimmers of hope that supply-chain disruptions showing more signs of subsiding.

That’s according to the latest economic trends report by the National Federation of Independent Business, released Tuesday. While 31% of owners reported that supply-chain disruptions have had a significant impact on their business and another 31% said the effect was moderate, that’s lower than in July and the three months before.

And for the first time since 2019, a net figure of zero owners viewed current inventory stocks as too low in October, after reporting depleted stockpiles for months on end owing to the pandemic-era snarls.

The survey’s metrics on inflation — a top issue in this year’s midterm elections — were mixed. (Read more about the US midterm election results and for Bloomberg’s US Election Risk Index.

The net share of owners rising prices ticked down for a fifth month to 50%, the lowest since September 2021 but still well-elevated. However, the share of firms planning to increase prices in the next three months rose for the first time since May, and about a third plan to raise compensation, the most this year.

A similar share see inflation as the single most important issue impacting small businesses, up from 30% in September 2022.

Labor remains the next biggest problem. Owners continued to report difficulty attracting qualified applicants and filling open positions. However, hiring plans retreated for the first time since June, though the figure remains elevated.

After setting records earlier in the year, retail shipments arriving at US container ports are set to keep slowing for the rest of 2022, the Global Port Tracker by the National Retail Federation and Hackett Association showed.

That’s because retailers stocked up far in advance of the holiday shopping season to avoid a repeat of pandemic-era port congestion and potential disruption from West Coast dockworker and US rail-employee talks, they said in a report.

They trimmed the forecast for container arrivals for November 2022 to 1.92 million 20-feet equivalent units, the first time imports may come in below 2 million since February 2021. For the year as a whole, 2022 arrivals may total 25.9 million units, which would just exceed last year’s record of 25.8 million.

Volumes for February 2023 are forecast at 1.71 million TEUs, 19% lower than the same month in 2022, when US ports were still congested.

War in Ukraine will push Asia Europe rail cargo back to sea

A report by UNCTAD on the trade and development impact of the war in Ukraine highlighted that Russia and Ukraine form a key component of the Eurasian Land Bridge. 

Restrictions on Russian air space, contractor uncertainty and security concerns, all impact both land and air cargo shipments between Asia and Europe.

“While Russian airspace is closed to 36 countries and vice versa, some freight forwarders currently recommend not booking overland shipments between Asia and Europe,” UNCTAD said.

Over the last two years of the pandemic and resulting global supply chain disruption shippers have increasingly turned to rail, air, and even trucking, from China to Europe to beat congestion on the ocean shipping trade between Asia and Europe that has driven freight rates to record levels, and dramatically reduced service reliability.

“In 2021, 1.5 million ocean containers of cargo were shipped by rail west from China to Europe. If the volumes currently going by container rail were added to the Asia – Europe ocean freight demand, this would mean a 5 to 8% increase in an already congested trade route,” the report stated.

The result could be even higher freight rates between Asia and Europe for ocean freight given the constrained capacity situation on the trade, even if at present rates were trending downwards from record highs.

“This is related more to a global trend in the easing of pandemic lockdowns and phasing out of stimulus packages, vis-à-vis slowly improving congestion in some port areas of the world. Upward pressure on prices, however, may soon win out on balance,” UNCTAD said.

With nearly 30 million people locked down in China over Omicron outbreaks, including 17 million in the southern port city of Shenzhen, analysts are warning of huge potential impact on the container supply chain if the situation worsens. Already there are reports of growing queues of ships at ports such as Yantian as while ports remain operating normally, warehouses and factories are closed, and trucking is restricted.

 

Supply Chain Delays Worsen in United States

While a growing number of Los Angeles-bound cargo ships are now biding time off the coast of Mexico, the supply chain crisis progressed this week as consumers found empty shelves in stores across the United States.

“There’s a big population of ships off the coast of Mexico,” Kip Louttit, Director of the Marine Exchange, told The Epoch Times. “If you look at the Pacific, it kind of makes sense to go down there. The weather is better the further south you go.”

The number of ships waiting to deliver goods in Los Angeles has jumped about 12% since October 2021, when President Joe Biden announced the ports would be opened around-the-clock to ease congestion.

The marine exchange reported 190 ships of all types were waiting in line to dock at the Los Angeles and Long Beach ports on January 19, 2022. In mid-October, the number was about 170.

It also takes about two months longer to deliver goods from Asia to the Pacific Coast now than in 2019, before the pandemic, according to Flexport, a San Francisco-based freight-forwarding company.

In early January this year, Flexport found that westbound shipments from Asia took an average of 110 days, a 65-day increase and a new record high.

Meanwhile, consumers continued to express frustration across social media with supply shortages. Photos of empty meat sections at a Tennessee Walmart have been shared, as well as empty shelves in Ohio, Missouri and around the country.

Retail shortages are widespread, Geoff Freeman, President and CEO Consumer Brands Association, a retail advocacy group, told the Associated Press earlier this month.

According to Freeman, typically US grocery stores have 5 to 10 percent of their items out of stock. Now, that rate is around 15 percent.

According to a recent poll, by the Consumer Brands Association and Morning Consult, 70% of respondents said they experienced shortages at grocery stores in December last year.

But Biden told reporters January 19, 2022 that the supply chain crisis did not occur during the holidays last year.

Empty shelves and a shortage of car parts, electronic chips and certain food products are becoming commonplace among businesses of all sizes in California, according to California Retailers Association President and CEO Rachel Michelin.

“It’s not getting as much attention as we were getting before, but there are still challenges,” Michelin told The Epoch Times. “I would say that on the supply chain side, it’s not getting any better.”

Michelin said small businesses continue to be especially vulnerable, not only because of the supply chain crisis, but also increased crime that is being reported nationwide and the ongoing disruption of COVID-19. “It is layer, upon layer, upon layer,” she said.

As a result, customers will likely have to start paying even higher prices for goods in addition to the current 7% inflation rate, she said.

Meanwhile, officials have not yet been able to predict when the shipping backlog will ease.

Flexport reported earlier this month that the increased demand for goods in the US is expected to stay and fixes by the Biden Administration have not panned out.

“Despite attempts in October last year by the Biden administration to unclog US West Coast ports there is still evidence that logistics networks remain congested, and will remain so, potentially for at least another year”, Flexport reported.

  

Cyclone closes one of the world’s busiest ports

The number of vessels waiting to enter one of the world's busiest ports has jumped to the most since August this, threatening to further snarl global supply chains strained by a surge in consumer demand for everything from cars to computers.

China's Yantian port in Shenzhen suspended pickup and drop-off of containers as tropical cyclone Kompasu approached the nation's southern coastline. The number of ships waiting outside the port rose to 67, the most since August 26, according to shipping data compiled by Bloomberg.

Located near China's tech capital of Shenzhen and the manufacturing belt of the Pearl River Delta, Yantian is one of the world's busiest ports, with a cargo throughput of 13.34 million twenty-foot equivalent units in 2020, according to figures from the Shenzhen Transportation Bureau. It typically serves about 100 ships a week.

Kompasu is the second tropical storm to affect southern China in the last few days, after Lionrock brought flooding to some low-lying areas of Hong Kong over the weekend. The damage from Kompasu could be more severe based on its current track and intensity forecasts, Bloomberg Intelligence analyst Steven Lam wrote in a note on Monday, October 11, 2021.

Bottlenecks at container terminals around the world have added to pressure on supply chains already struggling to keep up with demand. Covid-19 outbreaks at ports, along with shortages in shipping containers and labour have exacerbated the problem, with China - the world's biggest manufacturer - seeing a number of port disruptions this year.

The country has a zero-tolerance approach to the coronavirus, and has shut down port operations on single cases in the past. An outbreak at Yantian in June this year saw it closed, resulting in falling volumes as far away as the Port of Los Angeles. The Ningbo-Zhoushan port shut for two weeks in August because of a Delta variant infection.

Weather has also played havoc, with Shanghai's container port, the world's biggest, halting some operations last month amid a typhoon.