The Big Crunch of 2021 is widening supply strains in many corners of the global economy and boosting gains for others, like the world’s largest shipping line.
That’s the message Tuesday in a flurry of developments, beginning with a new Bloomberg Economics analysis of the turmoil. The research underscores the severity of the problems, shows how strains are getting worse in some regions, and reviews central banks’ options in limiting the inflationary and growth-inhibiting pain. (Click here to read today’s Big Take story.)
Across services and industry, gauges show U.S. supply shortages
Sources: Bloomberg Economics, ISM, BLS, Census Bureau
The timetable for any supply recovery is lengthening well into 2022 because key chokepoints like ports aren’t seeing any relief from the congestion yet.
The traffic jam of ships around Singapore, for instance, is worsening just as the hub of finance and trade battles to control Covid-19 cases, according to Bloomberg’s latest analysis of port congestion globally.
Shipping markets will likely remain this tight at least through the first quarter of next year, according to Copenhagen-based Maersk, which just reported third-quarter operating profit that was almost five times higher than a year earlier.
“Our clients are trying to meet strong consumer demand” as well as increase inventories, Chief Executive Officer Soren Skou said in an interview with Bloomberg TV.
The top carrier of ocean freight also announced the purchase of Senator International and the addition of two Boeing 777 aircraft to expand air cargo operations.
For container lines’ profitability, “2021 is shaping up to be the best on record, but we think that 2022 will be materially better,” Deutsche Bank analyst Andy Chu wrote in a note on Monday.
Though freight rates could recede from from record levels, Chu said the bank sees “significant upside to both contracted rates and spot rates when comparing 2022 with 2021.”
Deutsche Bank said it now sees average freight rates rising by about 30% next year versus 2021 — helping propel both Maersk and its German rival Hapag-Lloyd.
—Brendan Murray in London
Average lead times for materials, supplies lengthen considerably for U.S. factories
Source: Institute for Supply Management
The average time it takes for materials and supplies to reach U.S. factory floors increased in October to fresh records, Institute for Supply Management data showed Monday. The purchasing managers group said the lead time for production materials stretched to 96 days, while for maintenance, repair and operating supplies it hit 49 days — both the highest in figures back to 1987. One chemical industry respondent in the survey said “the supply chain is getting worse every day.”
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— With assistance by Lukas Strobl, Christian Wienberg, and Kevin Varley