Manufacturers and shipping executives in Asia, the world’s factory floor, have a simple message on the global supply crunch: It’s going to get worse before it gets better.
That was the message to Bloomberg correspondents in interviews with those on the front line of production and transportation. What was hoped to be a short-term crunch now looks lasting well into 2022.
“We do not expect freight rates to stabilize in the near term,” according to Karsten Michaelis, head of ocean freight at DHL Global Forwarding Asia Pacific. “The combination of a year of disruption, lack of containers, port congestions and a shortage of vessels in the right positions is creating a situation where cargo demand far exceeds available capacity.”
While his firm is offering customers alternative routes and modes of transport to ensure deliveries are made, he warns that “we have to be prepared that costs will stay at elevated levels and are not expected to go back to pre-Covid levels.”
The seasonal surge in demand for consumer goods ahead of the annual holiday shopping season is only adding to the crunch as factories rush to get their goods to U.S. and European markets on time.
“Capacity planning for the Christmas season has started much earlier this year because capacity is so tight in ocean freight,” Michaelis said. “We are seeing some customers even planning to fly in typical seasonal goods just to make sure they are on stock/in store on time.”
Spot rates for shipping containers from China to U.S., Europe hit new highs
Source: Drewry World Container Index
*Note: FEU refers to a 40-foot container
Adding to the strains, operations at China’s Meishan terminal in the world’s third-busiest container port will take at least a week to return to normal, according to Rahul Kapoor, vice president of maritime and trade at IHS Global Insight. The facility was closed for two weeks because a worker had Covid-19.
Meanwhile, companies are having to adjust.
Taiwanese window coverings maker Nien Made Enterprise is making extra use of its newly expanded production lines in Dallas and is also expanding its Mexico facility to alleviate the impact of the shortage of containers.
—Cindy Wang in Taipei and Enda Curran in Hong Kong
Afghanistan is estimated to have more than $1 trillion in deposits
Sources: U.S. Geological Survey
Afghanistan is sitting on deposits estimated to be worth $1 trillion or more, including what may be the world’s largest lithium reserves — if anyone can get them out of the ground. If things go right, China just might try. Such resources are valuable in modern economies driven by advancements in high-tech chips and large-capacity batteries. “With the U.S. withdrawal, Beijing can offer what Kabul needs most: political impartiality and economic investment,” Zhou Bo, who was a senior colonel in the People’s Liberation Army from 2003 to 2020, wrote in an op-ed in the New York Times over the weekend.
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