Port Gridlock Stretches Supply Lines Thin in Blow for Economies

Date: Monday, October 18, 2021
Source: Bloomberg

Global ports are growing more gridlocked as the pandemic era’s supply shocks intensify, threatening to spoil the holiday shopping season, erode corporate profits and drive up consumer prices.

Bloomberg’s Port Congestion Tracker shows a typhoon in Asia spawned another wild week for shipping in a year with multiple challenges -- a vessel wedged in the Suez Canal, a dozen major storms, rolling Covid lockdowns disrupting key manufacturring hubs in China and Vietnam, a shortage of truckers and dockworkers, and a resurgence of consumer demand.

As of Friday, at least 107 container ships were waiting off Hong Kong and Shenzhen, the data show. The pileup worsened when the storm brushed past Hong Kong around midweek, shutting down its stock exchange and idling its ports. Globally, RBC Capital Markets reckons 77% of ports are experiencing abnormally long times to turnaround traffic.

The latest congestion won’t be isolated to Asia for long, as delayed ships loaded with merchandise soon start sailing for the U.S. and Europe.

As the Big Crunch of 2021 has repeatedly demonstrated, a bottleneck in one corner of the globe eventually exacerbates a logjam or compounds shortages in another.

Even if shipping strains ease in China, that “could still mean new surges of vessels arriving at congested ports like Los Angeles-Long Beach, shifting the backlog to the destination ports,” said Judah Levine, head of research at Hong Kong-based Freightos.com, an online shipping marketplace.

President Joe Biden last week urged the L.A. port to run a 24/7 operation. In the U.K., containers filled with goods and outbound empties were piling up so high at the key port of Felixstowe that at least one container carrier had reroute cargo through ports in mainland Europe.

That all spells trouble for the world economy. Concern is already mounting that holiday shoppers won’t be able to buy the gifts they want, dealing a blow to retail sales. Companies are worried about their bottom line with executives at Tesla Inc., Target Corp. and other S&P 500 companies mentioning “supply chain” a record 3,000 times during presentations as of Tuesday. And a lack of goods and costlier shipping mean further upward pressure on already heady inflation.

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