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Supply Chain Bottlenecks Likely to Continue

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Container ship loading and unloading in sea port. | Image by Shutterstock

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Supply chain bottlenecks continue to frustrate the normalization of global trade.

Some factors playing into freight congestion, particularly between the United States and China, include labor shortages and China’s COVID-19 lockdowns.

Tim Scharwath, freight executive at DHL Global Forwarding, told Bloomberg that congestion should ease next year with new container vessels hitting the seas and a likely dampening of global demand. However, he predicted that bottlenecks would continue to spring up, dashing any hope shipping would return to a pre-COVID dynamic.

“It’s not going to go back to 2019,” Scharwath said. “I don’t think we’re going to go back to this overcapacity situation where rates were very low. Infrastructure, especially in the U.S., isn’t going to get better overnight, because infrastructure developments take a long time.”

Logistics — the business of moving and storing goods — in the United States has suffered both labor shortages and underinvestment in infrastructure, according to a recent report by the U.S. Department of Transportation.

A lack of long-haul truck drivers and dock workers contributes to backups at coastal shipping facilities. This has been exacerbated on the West Coast because of China’s commitment to its “zero-COVID” strategy of citywide lockdowns.

Periodic shutdowns and reopenings of important production nodes in the global supply chain cause enormous cascading disruptions in production and trade.

The recent reopening of Shanghai from its two-month lockdown initially put port authorities, shippers, logistic companies, and retailers on edge as they anticipated a flood of Chinese goods clogging up shipping lanes and overtaking warehouse capacity.

Scharwath observed, however, that Shanghai authorities are “[opening] up slowly to make sure that this clog goes out piece by piece and bit by bit to get the flow running.”

Congestion may be limited in the Shanghai case, but Scharwath stressed to Bloomberg how fragile the global supply chain has become. He pointed to an ongoing trucker strike in South Korea that threatens to disrupt global computer chip production.

“Any stress you put on top of it, doesn’t matter where in the world, will have influence in other parts of the supply chain,” he said. “Five years ago, the Korea situation wouldn’t have had an impact. Now it has.”

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