Great supply chain disruption to continue in 2022: IHS Markit

The company released a report titled The Great Supply Chain Disruption: Why It Continues in 2022’ recently.

Port congestion continues to significantly slow the circulatory movement of ships, containers and other transport assets including chassis—removing capacity, lengthening transit times and forcing shipping rates much higher, wrote Peter Tirschwell, the company’s vice president for maritime and trade, in the report.

As 2022 begins, the container shipping supply chain remains in the deepest crisis it has ever seen, and unwinding the disruption will take months, he wrote.

Exacerbating the crisis in container supply chains is capacity. Ocean carriers and freight forwarders report that there are enough ships and containers to handle even the elevated demand. The problem is that so much of that capacity is idled or circulating more slowly. The result has been to take significant capacity off the table, he wrote.

Estimates are that 10-15 per cent of capacity has been removed due to congestion. This is evident in the freight rates, where spot container freight rates are up three to five times versus just a year ago, depending on the trade lane.

“The 2022 outlook remains one for continuing disruption with no guarantee of a quick return to pre-pandemic system fluidity at least through the first half of the year,” Tirschwell added.

Businesses in 2022 will be forced to pay more for labour, especially to service workers who were some of the lowest paid workers and most in danger of getting COVID-19, and have been most hesitant to return to work, wrote John Anton, director, pricing and purchasing service, at the company.

Political decisions will play a much more significant role in supply chains in 2022 as governments seek to control strategic resources and secure competitive advantage, wrote Nathalie Wlodarczyk, vice president of risk intelligence solutions.

Entering 2022, crude oil prices are up about 55 per cent from a year ago at this time. Internationally traded coal prices recently were up 100 per cent, wrote Jim Burkhard, vice president, oil markets, energy and mobility.

And spot prices for gas in Europe and Asia in early January are 350 per cent higher than a year ago. That can change by the day or the hour, but that provides a sense of the magnitude of the increase in prices and volatility seen over the last year, he added.

Fibre2Fashion News Desk (DS)