The supply chain crisis is expected to extend into 2022


If you thought the shipping crisis was over, think again. As we head into 2022, Aussies should expect longer delays, fewer products, and rising prices.

If you thought the shipping crisis was over, think again.

By early 2022, Aussies should expect longer delays, fewer products, and soaring prices, affecting everything from food and clothing to appliances, electronics, and cars, experts say.

“The bottom line is that prices will continue to rise to unprecedented levels,” said Jackson Meyer, CEO of shipping company Versus Global.

All of this will come in the face of increasing consumer demand as Covid-19 bans and restrictions wear off.

In 2021, the complex and finely tuned global supply chains that move goods from factories and farms to store shelves around the world got caught in a perfect storm of factors such as Covid-19 bans, rising consumer demand, extreme weather events and labor shortages.

A new crisis has emerged on the Australian coast in recent weeks – a critical shortage of AdBlue diesel exhaust fluid that the trucking industry fears could cripple the transport networks that bring goods to consumers.

The most important ingredient in AdBlue, urea, which is experiencing delivery bottlenecks worldwide due to a Chinese export ban, is also used in fertilizers.

Australian farmers have already described an exploding fertilizer Costs as a “kick in the bowels”.

Mr Meyer said urea shortages are a big problem for Australian farmers and could prevent fruits and vegetables from reaching supermarket shelves.

Without tractors for food production and without trucks for delivery, combined with rising fertilizer prices, farmers worldwide are affected.

At the same time, global shipping disruptions are showing no signs of weakening.

The cost of importing goods into Australia rose 450 percent last year, delays mounting and capacity shrinking as airlines increasingly divert ships onto the more lucrative transpacific route that serves the United States.

“To give you an insight, we just received the notification today that shipping companies have practically suspended bookings – no new bookings will be taken into account until mid-January,” Meyer said in an interview on December 15th.

“That’s ridiculous. All importers are affected – food, furniture, electronics, everything.”

Mr Meyer said Australia-based food and beverage manufacturers would be particularly hard hit as they often rely on ingredients, additives and spices sourced from overseas.

Other raw materials like resins used to make plastic bottles have faced delays and bottlenecks, as have finished products like food packaging.

“There is a point here where it actually costs more to import the container than the value inside the container,” he said.

“We see bickering between importers and their own customers trying to get price increases to keep their business going. Ultimately, it will hit the consumer. “

Meyer said import delays are already averaging two weeks, with an expected 21 days from February.

“It’s an incredible amount of time,” he said. “Especially local businesses that sell to other local businesses on a timeline will be penalized and canceled if they can’t keep to their schedule.”

According to the S&P Global Platts Container Index, average prices for standard 40-foot containers on major global routes have increased from around $ 1,000 to more than $ 7,000 since last year.

Tony Srnec, operations director at Sydney-based Summit Global Logistics, said customers were changing their business models as shipping costs meant it was no longer worth importing.

“In my opinion it will go on and I think we will just learn to live with it and adapt to it,” he said.

In the meantime, the ongoing disruption due to isolation and quarantine requirements is likely to continue as increasing cases of the Omicron variant raise fears of another wave of the coronavirus pandemic.

Meyer said major calendar events, including the Chinese New Year on February 1 and the Beijing Winter Olympics, which begin on February 4, threaten to put pressure on already ailing supply chains.

Port closings are expected in northern China – one of Australia’s busiest shipping routes – while ports in southern China are extending suspensions over the New Year holidays for at least six weeks due to strict quarantine measures for ship crews, he said.

“We have an office in Shanghai – the buildings next to us were practically closed for 14 days,” said Meyer. “There’s no visibility of when and where things are going to shut down.”

Mr Srnec said that traditionally after the Chinese New Year celebrations, shipping costs tended to go down “quite significantly” so “it will be interesting to see what happens this year”.

Last month, Australia’s competition authority pointed a finger at the powerful Maritime Union (MUA) for disruptive measures in the workplace that allegedly contribute to supply chain bottlenecks.

Even before the recent disruptions, the country’s container ports were “relatively inefficient” and “well below” international best practices, according to the report by the Australian Competition and Consumers Commission.

“We were told that some shipping companies were withdrawing services from Australia even before the arrival of Covid,” said ACCC boss Rod Sims. “Australia must act decisively to remain an attractive destination for global shipping companies.”

The watchdog said industrial action and “restrictive labor practices” enforced by the Union – such as demands for recruitment quotas for “family and friends” – added further disruptions to the supply chain and exacerbated delays.

“For example, a shipping company has informed ACCC that the delays in Port Botany in September 2020 cost around 25,000 US dollars per day per ship,” the report said.

However, the MUA blamed “astronomical international shipping costs” for Australia’s supply chain shortages, saying that “entrenched cartel behavior by shipping companies” is affecting consumer access to imported goods.

Mr Meyer said there was some truth to this, as large shipping companies recently reduced the proportion of their contracts to Australia at cheaper fixed prices that are normally negotiated annually for large bulk carriers.

While around 65 percent of the contracts were previously concluded at lower fixed prices, shipping companies had actually reversed the allocation to market prices “in order to maximize profit”.

“Which ultimately means fewer products will come in,” he said.

[email protected]

About Christine Geisler

Check Also

Beyond Energy, 5 ETFs to launch this year – June 21, 2022

2022 has been the worst for the stock market in decades as the S&P 500 …