6 November - 12 November

Global Trade Slows And Supply Chains Remain Unbalanced | Trend Report

Spotlight on the slowing growth of global trade and a look at the volatile supply chain trends.

Highlights on a supply chain attack on US news providers, an SAP report highlighting the possibility of supply chain issues in 2023, and more.

Trending discussion on concerns about freight workers going on strike, even as a major railroad union caves in and approves a deal with freight railroads.

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2020-21 was marked by an exponential increase in demand, with COVID-19 ensuring that supply chains had to pivot to serve customers staying at home. However, 2022 has seen some semblance of normality return to global supply lines. Port congestion in ports across the US has finally eased, and demand seems to be dropping back to pre-pandemic levels. But all is not rosy as it seems. The Russia-Ukraine war, trade, and labor conflicts, as well as inflation, have all impacted logistics networks adversely. As a result, global trade seems to be slowing down and supply chains remain unbalanced.

On the back of a relatively strong first half of the year, global trade will likely see a growth rate of 3.8% for the whole of 2022, but amid headwinds, the pace is slowing quickly. For next year, we expect merchant trade growth to slow to just 1.2%, as discussed in more detail in our trade outlook for 2023. This falls behind expected GDP growth.

Global merchandise trade held up well so far this year given the volatile and uncertain environment, with world goods trade standing at 4.4% year-to-date (January to August) according to CPB world trade data. In the first half of the year, consumers’ appetite for goods was still running high compared to the year before, but with a shift back to services and traveling, and with people worrying about the rising cost of living, things changed over the summer.

In terms of categories, the energy crisis tends to lead to more transport of energy carriers (like liquefied natural gas, or LNG). Demand for oil and oil products is continuing to catch up after the COVID-19 pandemic setback and this is expected to continue in 2023, despite weak economic perspectives. Softening demand has also sent spot rates on major trade lanes from Asia down, ending an extraordinary two-year period in container shipping, although locked-in contract rates slow the impact for shippers.

Key Takeaway

With consumer demand faltering, the energy and subsequent inflation crisis persisting, and ongoing labor and material shortages, there are simply not enough silver linings to keep global goods trade robustly flowing. Energy prices are very likely to remain high, burdening (industrial) companies’ cost competitiveness and households’ purchasing power, despite government compensation packages. 

While Europe is expected to see a flat year, the US is holding up better and intra-Asia trade is expected to push up the global average. Transport will be significantly cheaper next year as well. On the container side (predominantly consumer goods), there will be very little growth and will stick well below its long-term average. For dry bulk flows, 2023 is set to be a better year as industrial demand from China is expected to catch up compared to 2022. All in all, predictions paint expectations for 2023 to be a mixed bag of slowing down and growth, as the global supply chains struggle with volatile markets.

Highlights

  • Due to a supply chain attack involving a service provider, hundreds of regional and national news websites in the U.S. are grappling with possible malware infections. More than 250 new sites have been affected, including those in Boston, New York, Chicago, Washington DC, Palm Beach, Miami, and Cincinnati.

Trending

As we come to the last few weeks of this year, supply chains across the US have been bogged down with weather woes, unforeseen delays, and other issues. A major concern for US logistics and supply chain players was talks of a labor strike, as workers demanded better working conditions from major railway operators. 

One of the 12 railroads unions in the US narrowly approved its deal with the major freight railroads, offering some hope that the contract dispute might be resolved without a strike even though two other unions rejected their agreements last month. Now that 52% of International Association of Machinists and Aerospace Workers members who voted approved their deal, seven railroad unions have ratified contracts that include 24% raises and $5,000 in bonuses, but all 12 have to approve contracts to prevent a strike.

Since the Brotherhood of Maintenance of Way Employes Division and Brotherhood of Railroad Signalmen unions voted down their contracts, there is still concern about the possibility of an economically devastating strike, and many workers say these deals simply do not address their quality-of-life concerns. As of yet, a strike has not been ascertained because the unions agreed to return to the bargaining table to try to reach a new agreement, but those talks have stalled over the unions’ demands for paid sick time, and there is a Nov. 19 deadline to these talks.

The railroads have rejected union demands for paid sick time because they say the deals they’ve been offering include higher wages that are intended to compensate workers for the lack of sick time and their other quality of life concerns. The railroads want any deal to closely follow the recommendations made this summer by a special panel of arbitrators that President Joe Biden appointed. The final outcome of these talks remains to be seen. Meanwhile, logistics players need to make contingency plans to deal with a possible labor strike.

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