Surging imports show importance of global supply chains

Policy makers should be wary of talking down the role of globalisation, despite the disruptions seen in the supply chain from high demand and the recent Ever Given grounding in the Suez Canal.

“Globalization is the work of decades; do not let it run aground,” said BIMCO chief shipping analyst Peter Sand.

lobalisation had been “shifting down through the gears” since the launch of the trade war between the US and China, but it was “nowhere near being in reverse”, Mr Sand said.

This had been witnessed by the strength of imports into the US, which in February were twice as high as they had been at the low point at the start of the pandemic last year.

The 100% increase in US imports was not only a result of a strong stimulus package to US consumers but also due to a “very slow” recovery in the US manufacturing sector.

“US manufacturing struggled throughout last year and when demand was picking up and underpinned by cash-rich consumers, they had nowhere else to go but to the key providers of consumer goods in Asia,” Mr Sand said.

In the meantime, elevated freight rates were set to remain in place for the remainder of this year.

“Any normalisation is not likely to manifest itself until 2022,” Mr Sand said.

“This is a fully global disruption in terms of equipment and congestion.”

These issues had been exacerbated by the Suez Canal grounding and the supply chain would feel the effects for several months as the impacts trickled down into the inland network.

Rates from Asia to Europe and the Mediterranean rose 5.6% and 5.3% respectively, with both trade lanes now commanding around $4,200 per teu.

But the biggest main lane hike this week was on the transpacific, where rates jumped by 12.7%, or $501 per feu, lifting them back over the $4,000 mark to $4,432 per feu for Asia-US west coast services.

“The normalization of the container market is taking longer than expected, due to ongoing bottlenecks and capacity constraints, exacerbated by the recent blockage of the Suez Canal, while container demand is supported by the greatest re-stocking cycle on record in the US,” said Jefferies analyst David Kerstens.