May 17, 2022

The Catholic Transcript

Complete News World

Logistics chaos: congestion in the world's ports, shortages of containers and...

Logistics chaos: congestion in the world’s ports, shortages of containers and…

Increasingly frequent discussions about current scenarios of input scarcity, and thus about the inflationary process recorded around the world, are also drawing attention to the logistical crisis, with congestion in ports around the world. According to the international journalist specializing in commodities, Karen Brown, the number of ships waiting to dock increased by 34% compared to last month at stations in the port of Shanghai, China alone.

“The lockdowns due to Covid-19 in China have exacerbated global supply chain problems. It is estimated that one fifth of the world’s container ship fleet is stuck in port congestion not just in China,” Karen explains.

The photo below, provided by the specialist, from Refinitiv Eikon, shows congestion of ships of all kinds, including bulk carriers and container carriers. The coast of China is one of the busiest, if not the busiest, coasts of China.

congestion in the port
Photo: Refinitiv Eikon + Karen Braun

The following picture is of ships carrying grain, and it is possible to note the huge concentration of grain on the Chinese coast.

polkers
Photo: Refinitiv Eikon + Karen Braun

Thus, all this chaos and this significant decrease in the efficiency of marine logistics around the world also takes into account the evolution of agricultural commodity prices in international markets. In the coffee market, the problem has been worrying since the middle of 2020, when the Corona virus did not even spread around the world.

The week ends with a strong sense of risk aversion, according to market analyst Eduardo Fanin, of Agrinvest Commodities, and part of that sentiment has, for months, been driven by these still-growing delays and logistical uncertainties.

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“China is still stuck in the policy of non-proliferation of the Corona virus, the service sector in China is under strong pressure, companies are considering leaving the country, and 25% of containers in the world are suspended, leaving supply chains increasingly under pressure,” he says.

The picture is already worrisome and there is still room for an interest rate hike by the US Federal Reserve, as well as “US mortgage rates rising sharply, business costs and pressure on margins, and IT companies offering lower-than-expected profits.” “As expected, the sanctions on Russia did not have the expected effects, oil is close to $110 a barrel. Anyway, there is a lot of bad news for just one month. It’s very difficult, with all these feelings, to rule out the pills,” he adds.

In addition to agricultural commodities, which are all parked in these containers or bulk carriers, there are still raw materials for the production of these products, and at the moment the biggest problem is fertilizers. Fertilizer delivery has been put at risk in many countries key to global agricultural production, including China – also due to the zero-tolerance policy of the coronavirus – and the United States.

“They say the delivery of soybean seeds and chemicals is too slow, which may favor corn. CF Industries again commented that delivering fertilizer to US producers will be a huge challenge this year. Waiting time in yards and an overall reduction in the efficiency of US rail lines will be the justifications. ‘ says Fannin.

What was observed in the early months of 2022 is the result of the shockwave of turmoil that the pandemic has brought to the world in the past two years. Currently, there are more than 40 closed cities in the Asian country.

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“For global chains, the past two years in China have been a sanitizer. Lack of components, delays in receiving and shipping goods, lost trucks, lost merchandise, lost perishable goods, rising costs and ‘bubble production’ systems. Back-to-back shutdowns. Power outages and new laws to combat Pollution, new laws to combat speculation, truck shortages and the inability to pass on costs to companies serving the local market. According to the European Chamber of Commerce, many companies are considering leaving China,” details an Agrinvest analyst.

The logistical crisis is also feeling the effects of 70 days of war between Russia and Ukraine. And a headline from Bloomberg News shows that the next conflict could actually reach the Black Sea, which could jeopardize the arrival and departure of products through the region.

sailor ukraine
A guard soldier in the Black Sea. Photo: Alexey Filippov/AFP/Getty Images

The Russians seem willing to cut off the Ukrainian economy from access to the sea—essentially a paraphrasing of the anaconda strategy US President Abraham Lincoln used in the nineteenth century to choke the Confederacy.

But Russian success is not guaranteed, as the Ukrainians have proven to be surprisingly strong at sea as they are on land, and have already carried out quite a few successful engagements against the Russian Navy. ”

With logistics taking up the space on the radar of traders and raising fears that are therefore growing, risk aversion is already in place. Just this Friday, after a quite volatile and intense week, soybean and corn futures closed out Friday’s trading session with significant losses, led by soybeans. The oilseeds ended their trading on the Chicago Stock Exchange losing more than 23 to 25.75 points, reaching in July to $16.22 and August to $15.71 a bushel. In corn, losses ranged from 11.50 to 17.75 points, with July trading at $7.84 and September at $7.42.

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Soybean powder and oil were also sold on the Chicago Mercantile Exchange after it posted a very volatile week. On the New York Stock Exchange, cotton and coffee are down more than 3%. Oil, following its fundamentals, closed in a positive range. Restricted supply remains a concern for the market – keeping ocean freight and all others at very high levels, as well as other variables – despite demand from China – due to continued shutdowns that still generate some uncertainty.

On the other hand, only against the real, the dollar rose only on Friday by more than 1%, bringing the US currency to 5.08 Brazilian real.