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The inflationary spiral and the adjustment of production and demand are opening the global logistics block.

Shipping channels for goods, through which 80% of the exchange of goods and international logistics products flow, are starting to return to normal. It had yet to reach equilibrium before the health crisis and the April 2020 collapse of the mega-cargo ship Ever Given in the Suez Canal. This channel is a choke point or transoceanic shortcut through which 12% of world trade passes and has become the origin of commercial disruptions that have led to trade container tariffs.

In the days leading up to these exercises, container prices have corrected by more than 90% on the most heavily trafficked route in the maritime circuit connecting Chinese ports to the US West Coast. And the trend points to an even bigger correction, predicts Freightos, an online freight operator.

Logistics managers are sending messages to their customers that rates are being redeployed at a faster-than-expected pace, as multinational HLS confirmed in a recent market note: “Initially, we envisioned full normalization at some point in the first half of 2023, but that scenario is closer.”

Another benchmark operator, OL USA, confirms that the rate limit was fixed in April and that since then the adjustment has been increasing, reaching the lowest value in November. Its chief executive Alan Baer admits that “while it is still too early to say that this trend will continue” with a host of uncertainties remaining or emerging in 2023, inertia will push prices lower, exacerbating congestion. bottle necks.

It was a special year for shipping companies. The strongest trading lines reported a profit of $122,000 million from January to September, an amount that continues to be extraordinarily profitable, says Anal Murphy, CEO of Sea-Intelligence.

The sudden turn in the post-Covid business cycle has accelerated this price reduction. Much of the responsibility for this economic turnaround lay with global demand, which declined throughout the year, but more markedly in the second half of 2022, despite double-digit inflation in household consumption and headwinds from corporate investment. .

Trade data already showed Asian imports from the US fell 11% year-on-year in October, which, combined with September’s decline, heralds an already pessimistic turn, HLS warns. At Norwegian multinational Xeneta, a logistics contract reference firm, they forecast a new rate cut of 5.7% in November; The sharpest in its XSI price index since 2019, according to its chief economist, Peter Sand. The analyst expects the final quarter of “record-breaking” prices.

Sandi predicts a 40% drop in manufacturing orders in China, delaying a normalization of demand “until at least the summer of 2023.” Additionally, he points out that 85% of his client plans, gathered from surveys, choose to reduce their tax costs next year; Only 42% believe they will remain in line with 2022 prices. Despite the Beijing government’s zero-Covid policy lifting restrictions, shutting down industrial and logistics companies, and offering viable alternatives to air and road transport, contracts with China have been signed. experienced and thus alleviated logistical delays.

In this context, Judah Levin, the chief researcher of Freightos, leaves a nuance that shows that this rate fluctuation is latent: “compared to 2019, they decreased by about 5% in the commercial gateway between Asia and the US Pacific coast, but still. Routes between Asian markets and US Atlantic ports remain 32% higher than pre-pandemic levels.

According to him, the explanation for this distortion is to be found in the relaxation of Russian fuel prices destined for Asia and in the faster depression of containers in this continent and in the American Pacific during the time of Covid-19, which pushed the rates lower. virulence. At BIMCO, they point to an “open price war in 2023” due to the adjustment between supply and demand.

“The number and volume of trade orders in China has definitely declined,” Logistics Group CEO Joe Monaghan told Bloomberg. Monaghan admits that “the average utilization of our merchant ships is down, we’ve had the biggest demand for cancellations” since last spring.

This panorama is similar to institutions such as Unctad, whose experts point out that in 2022 global trade will reach a historical value of 32 trillion dollars, which will increase by 12%, due to the escalation of energy prices and service costs. for the invasion of Ukraine and the accompanying damage. The United Nations Trade and Development Agency attributes this increase – nearly 10% to 25 trillion in the flow of goods and 15% in services, which is close to 7 trillion – to “rising premiums for materials energy, metals and food. And services in high demand for the population and companies “.

In fact, Unctad predicts a decline in trade in 2023 due to geopolitical tensions, low economic growth, inflationary sources and historical records of debt, which will put companies and their value chains to another test of resilience. In 2022 – he explains – this resilience made it possible to “maintain the pulse of global demand and increase trade exchange”.

China is losing its status as a great world factory in favor of its Asian neighbors, on which the center of gravity of international economic relations is beginning to shift as part of a general process of displacement. For example, Apple shifted its manufacturing plans to Asia from its second global powerhouse in 2022 due to Beijing’s strict zero-Covid policy. In 2025, India could host 25% of the production of new iPhones.

For the first time since 2016, goods made in China, such as furniture, sports shoes or clothing accessories, are losing market share overseas. Although trade between the US and Europe is growing at a good pace and analysts see Mexico and Vietnam. A new lure for companies looking to diversify their value chains is ahead of countries like Indonesia or Brazil.

As well as the consequences of trade wars between the two giants. The White House recently added 35 more Chinese firms to its blacklist to ban the export of drivers, chips and high-tech materials to the Asian giant.

The United States and Europe have stopped calling on Chinese factories to avoid further disruptions to trade, logistics and manufacturing supplies, even though it would lead to illusory changes in the maritime-trade map. The commonality of interests – they explain in the commercial consulting project 44 – between the two sides of the Atlantic Ocean in aspects such as sanctions against Russia “is also explained as a formula for pressure on China, with the aim of reducing its excessive commercial dependencies and its geostrategic alliance with the Kremlin.

Source: El Diario





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