SUPPLY CHAIN UPDATE: CONTINUING DOWN THE PATH OF STABILITY

By Jacob Wright

Amidst developing economic downturns and geopolitical conflicts, the supply chain situation has fallen a bit off the radar of many corporations compared to the recent past. With that being said, there are still plenty of developments to keep track of and monitor for the sake of efficient transport and logistics. 2023 has played out like many have suspected it would – essentially, a mirror of 2022. Demand started out slow in the beginning of 2023, but it is rapidly picking up going into the second half.

In North America, one thing that stands out is East Coast ports have started outpacing West Coast ports in volume. Since 2017, West Coast ports usually saw a volume share of over 50%, sometimes approaching 60%. Now, in 2023, that share has fallen as low as 44%. The leading cause behind this are labor disruptions from the ongoing dispute between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU). These labor disruptions have caused many importers to shift to the East Coast for the sake of lead time reliability. On average, the vessel wait time in North America is currently 0-1 days.

In the Asia Pacific market, production has increased following the end of COVID policies set by China, leading to an increase in export volume. As a result of increased production and unfavorable weather conditions, Asia Pacific ports have experienced an uptick in congestion.

The good news is the congestion is still nowhere near pandemic levels and is expected to stabilize. The primary concern for ocean carriers is the upcoming fog season in China which is expected to impact operations to some degree.

In Europe, spring/summer weather is a welcome sight after certain instances of extreme winter weather. The change in weather has brought about smoother operations and greater carrier reliability. In France, labor strikes are ongoing and, as such, relevant ports are experiencing disruptions and congestion. Asia-Europe trade has seen a substantial increase in Q2, brought about by the better weather and end of COVID policies in China. Air freight volume continues to be in a slump. Air demand is down, to the extent that capacity is greater now even when compared to pre-pandemic levels. The reasons for such low demand include various economic conditions like inflation, geopolitical conflicts, and the improvement in ocean transport.

Overall, the global supply chain is incredibly stable coming off of a hectic 2022. Growth and demand is still expected to be underwhelming in 2023 as inflation and geopolitical conflicts continue to cause great uncertainty and lower demand among consumers. Nevertheless, some degree of growth is expected, and the supply chain is more reliable than we’ve seen in recent years, giving reason for optimism. ■