Are supply chain challenges easing?

16 August 2022

Declining shipping rates and port congestion are helping to “unwind” pressures on global supply chains, according to a report.

The report by Fitch Rating, Goods Inflation Slowing as Global Supply Chain Pressures Ease, said declines in shipping rates, delivery times, port congestion and backlogs were helping ease pressures on supply chains. 

The report found the cost of shipping freight has dropped by as much as 70% on some routes since September 2021, after costs on some routes reached up to $21,000

The time to transport cargo has fallen from 122 days in April 2022 to around 90. Meanwhile, congestion at US ports “dropped significantly”, falling by almost 80% since last November.

Fitch said there are “signs semiconductor shortages [are] starting to ease as the time taken to deliver them appears to have peaked”. It noted Korean inventories of semiconductors has risen at the fastest rate since 2016.

The report said as the cost of living crisis leaves consumers with less disposable income, falls in demand for manufactured goods has helped ease supply chain bottlenecks.

However, the report acknowledged “risks to the supply chain remain” due to China’s zero Covid-19 policy, which could result in renewed disruptions to exports, and gas rationing in Europe due to Russia’s war in Ukraine may hit industrial supply chains. 

“Nevertheless, recent improvements to global supply chain pressures are encouraging,” Fitch said.

However, the UK’s biggest privately-held logistics firm EV Cargo, which handles logistics and supply chains for Asda, Sainsbury’s and Next, warned worldwide shipping problems will “continue for years”, with supply chain issues compounding the cost of living crisis and pressure on businesses.

According to the Independent, Heath Zarinm, founder and CEO of EV Group, said: “It’s going to take a period of years to stabilise and get back to normal.”

He said “there will be ups and downs but there won’t be a massive form of relief from elevated prices” and high shipping prices and availability problems will take years to fully resolve.

“It’s very serious overall and another reason why inflation and higher prices are likely to be with us for longer than anybody would like.”

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