Is the Global Supply Chain Broken?

In our last post, we commented that one of the issues we were monitoring was the flow through impact of interruptions to the global supply chain on company margins and inflation numbers.  While the Suez canal blockage and Covid-related stoppages of early 2020 are long behind us, and the prices of some industrial commodities like lumber have come back down to earth, the global supply chain is still far from healthy.  Vessels are stacked up again off the southern California coast, with upwards of 44 container ships anchored outside the ports of Los Angeles and Long Beach just a few weeks ago, as you can see from the graphic below.  In pre-Covid times, there would be one (or none) anchored at these ports.  The delays in delivery schedules and increases in operational and overhead costs (eg. Higher prices for containers, extra fuel and congestion charges) are flowing through to higher freight rates and shipping costs.  Ultimately, this pressures company margins and leads to lower production rates (eg. Parts shortages curtailing auto production), and takes money out of the consumer’s wallet in the form of higher shipping costs.  While we expect these disruptions to be short-lived (the LA port traffic peaked in February, and cleared by late May), so the market is largely “looking through” company results impacted by the delays, the shift in corporate and consumer behaviour that results may be more persistent.  More on that in future posts.

https://www.marinetraffic.com/blog/port-congestion-issues-cause-on-going-headaches/

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