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Home Carriers

War Tearing Trade Apart, Hitting Logistics, Prices and Supply

by Dafizeck Daud
March 9, 2022
in Carriers, Editor's Choice, Feature, Supply Chain, Transportation, Uncategorized
Logistics Asia: Today’s top stories
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By Bryce Baschuk

At the start of 2020, a global pandemic hammered the world’s economies and caused the worst disruption to the global trading system since World War II.

Then in 2021, historical swings in demand for physical goods roiled global supply chains and boosted container shipping rates to all-time highs.

This year, war has returned to Europe and a near-total embargo of one of the world’s busiest lanes for cross-border commerce will further reduce any remaining slack in the global trading system.

The cumulative effect of these events will mark a new era for international trade that will reverberate decades from now.

Real-time shift

We’re already seeing the shift in real time.

This week, a German think tank published a report that found nearly all economies are already experiencing a precipitous drop in trade due to Russia’s war with Ukraine.

The Kiel Institute for the World Economy said Russia is being hurt the most by the US and European sanctions — with a projected 11.8 percent drop in exports in February compared to the prior month.

Over the same period, the US saw a 3.9 percent decline in shipments abroad, the European Union a 2.8 percent fall and Germany a 3.8 percent slide, according to the report.

Adding fuel to the fire are the skyrocketing global prices of oil, natural gas, metals and grains — which may further accelerate if the US and Europe move to sanction Russia’s energy exports in the coming days.

What does this all mean for businesses and consumers?

The war in Ukraine will likely reinforce plans for businesses to “reduce their reliance on intricate global supply chains,” according to a report issued this week by Oxford Economics.

That shift will drive companies to prioritize supply resilience over just in time delivery — and for some it could finally persuade them to re-shore their entire logistics strategy. It’ll take years, a lot of investment and it might even make the world a poorer place.

A global reshoring of value chains would be a very bad idea, as it could drive an additional 52 million people into extreme poverty, according to a recent report from the World Bank.

For consumers, the high price of shipping physical goods across the world will ultimately hit their wallets and force them to rethink whether their demand for goods justifies the cost.

A negative swing in consumer sentiment will further dent global growth and contribute to the rising risk of prolonged stagflation in the world’s economies.

In short — it’s a mess and it’s only getting worse.

Tags: LogisticsRussia Ukraine WarSupply Chain

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