202 1 Causes of Logistics Crisis in Import and Export Trade

The new indicators set by Bloomberg Economic Department highlight the extreme seriousness of the problem, and there is no quick solution, so the great crisis of 20021may get worse in the coming months. Bloomberg's research quantifies the situation in most parts of the world, such as supermarkets with empty shelves, ports with mountains of ships, or automobile factories whose assembly lines are paralyzed due to an unprecedented lack of microchips. All this is accompanied by a sharp rise in prices.

As experts from Bloomberg explained, the collapse went further: it was not just a matter of moving goods from one place to another, and the world was still trying to make production meet demand. After the epidemic paralyzed most of the world's production structure, the surge in demand made producers out of balance. Now, this situation may last for several months, or no one knows how long it will last.

Central bank headache

Central banks are beginning to realize that inflation is no longer temporary, which may force them to withdraw stimulus measures and raise interest rates ahead of schedule. This poses a new threat to the already slowed recovery, and also poses a risk to the stock market that continues to trade near historical highs.

Behind the blockage of this big pipeline of international trade is the overload operation of transportation network, the shortage of labor at key points of trade, and the demand in the United States has been strengthened under the great financial stimulus, and the concern for goods has exceeded the concern for services.

The problem occurs at multiple points, from the production center to the receiving point of the goods. In Viet Nam, factories producing Nike shoes had to cut production because workers left their hometown for fear of contracting COVID-19 virus. China, as a big manufacturing country in the world, is facing a new outbreak, and it responds by selectively shutting down. Its ex-factory price is increasing at the rate of 10% every year, which is the fastest speed since 1990.

Combining all these factors, the index provided by Bloomberg Economic Department shows that there is a serious shortage of goods in the United States, Britain and the euro zone. This indicator is based on various data, from the factory price to the relationship between inventory, retail and order backlog of service companies. A reading of zero means normal, a negative number means goods are piled up, and a positive number means demand exceeds supply. These indicators showed a sudden change, from oversupply before the epidemic crisis to serious shortage today.

For multinational companies like Toyota, which cut production by more than one-third in September, as well as companies that have moved their products around the world and buyers waiting for delivery, the biggest question now is: When will the congestion end? The most optimistic answer is the first half of 2022, but the fact is that no one knows what will happen next.

Amazon and Apple are pessimistic.

Even giants like Amazon and Apple, who are used to shaping the supply chain at will, don't think the situation will improve soon. Amazon has realized that all the gains in the fourth quarter may disappear due to the increase in labor costs and the difficulty in fulfilling orders. Apple admits that it is losing about $6 billion in sales because it can't meet demand, and may lose more next quarter.

Shanella Rajanayagam, an economist at HSBC, believes that the situation in the logistics industry should start to improve after the Lunar New Year, that is, in early February next year, "although the interruption may last at least until the middle of next year." However, uncertainty continues to dominate international trade, and no one knows what will happen in the short to medium term. Excess savings accumulated during the epidemic period played a destabilizing role here, because it would aggravate the problem.

Snowballs are getting bigger and bigger.

The next step is unknown, partly because there are many bottlenecks on the route from the assembly line to the family shopping basket. When one supplier waits for another supplier to deliver the goods, the retailer must wait for the products to be put on the shelves, and the delay will affect each other.

Logistics systems usually follow the ups and downs of the global economy in a predictable mode: the increase in demand promotes trade, which in turn pushes up transportation prices and increases the income of freight forwarders, while freight forwarders in turn invest more to increase their transportation capacity, thus achieving a new balance between supply and demand relatively quickly. "But the epidemic broke this cycle. Even if there are signs of slowing growth, the international trade pipeline has never been so blocked. " Bloomberg economist said.

Now, shipping from Singapore to Piraeus Port (Greece) has collapsed. Shipping bottlenecks were initially caused by bad weather conditions and virus outbreaks, such as what happened recently in Singapore. However, these traffic jams are causing container ships to move to other ports, thus causing new traffic jams. A recent analysis of port congestion shows that there is a long delay in Singapore, with 53 container ships berthing, which is the highest record since Bloomberg began to track such data.

This is a problem in the United States and Europe, where clothing and electronic products filled with consumer shopping carts depend on foreign supply and assembly. As vaccination rates in many Asian countries are still low, this problem will not disappear soon.

Luck factor

Simon Heaney, a senior container researcher in Drewry, London, said that "it takes some luck to restore the supply chain" to avoid meteorological disasters or new outbreaks, "and to increase the time and investment of more logistics capacity".

If the world economy wants to get rid of the worst recession in modern history, the supply shortage caused by strong demand is a big problem. Obviously, the opposite situation will be worse: adequate supply. Millions of people are still unemployed because the economy is still depressed. The key is that tight supply will further slow down the economic recovery than expected.

The supply chain may also collapse faster than expected. The lack of precedent in similar situations also brings great uncertainty to the solution of the problem. For example, Bloomberg's American shortage index has dropped in recent readings, but it is still at the highest level in history.

"The current situation is unique and completely different from other more isolated shocks experienced in the world," said John Butler, CEO of the World Shipping Committee. "The current congestion solutions will also be different."