Another year of supply chain frustrations ahead

SIMON BROWN: I am now chatting with Denys Hobson, logistics and pricing analyst at Investec for Business. Denys, I appreciate the early morning. We discussed logistics supply chains in September. It was hard. Since then we’ve had Omicron, which kind of closed the borders again, closed the ports, etc.

DENYS HOBSON: Hello Simon. Yes, I think the latest variant and outbreak has created further disruptions for two supply chains, especially with labor shortages that have impacted your tracking services, created additional pressures on your terminal facilities, your warehousing, which has just led to further backlogs and congestion within supply chains.

We saw in December and early January a significant number of canceled flights, which had an impact on air cargo capacity. Then we saw major delays in sailing schedules, ships not leaving on time due to port congestion, especially in the US, Los Angeles – this probably got worse; at any one time there could be over a hundred ships waiting to berth and we have also seen delays increase and be very erratic and unpredictable.

So to answer your question, it hasn’t really improved.

SIMON BROWN: From what you say, it’s pretty much everywhere. He is hit all over the place. It’s not [a case of] it might just be trucking, but airfreight is fine. As you mentioned, many flights have been canceled and a lot of that cargo is actually going into the body of an aircraft with passengers on top. It disappears. The meaning is that it is overall through everything, it remains cluttered. Is there hope for this compensation in the next six to 12 months, or are we going to have to wait and see?

DENYS HOBSON: It is very difficult to predict when we can expect some stability. You just need a major event like the one we had last year with the blocking of the Suez Canal or the closure of the port of Yantian to really go disrupt things on another level.

We expected to see some kind of stabilization at the end of the year, and there are pockets of improvement that we see from time to time. I’m going to give you an example. Last year we had a hard time getting the containers on time. So we have seen new container bills coming into the market, which has eased the pressures to some extent.

But the biggest problem is really the current congestion on the sea freight side: more or less 12% of the world’s capacity is blocked or blocked outside ports. This affects the demand for air freight, for example.

Now you have labor shortages, which then create processing delays with air cargo and flight cancellations. So everything has a ripple effect. We have to go past this Chinese New Year period to see what the situation is after that. I know many shipping companies are also waiting to see what demand will look like after Chinese New Year.

So for now it’s waiting.

We have seen the rate levels on trade between the Far East and South Africa stabilize somewhat, and [we] expect these rates to drop slightly, which is good news; but shipping companies will no doubt try to keep the rates high. The pressure is on for them to maintain their record profits. So it’s going to be interesting.

SIMON BROWN: I think most have made their best profits in the history of the company.

One last quick question. Locally, the Port of Durban was a problem. We have seen problems with Transnet as well as with their rail lines. Do we see improvements in these two?

DENYS HOBSON: Durban still remains a big headache for the industry. Again, labor shortages, lack of skills sometimes. And then we saw equipment failures or maintenance that was not done, which impacted the productivity of the port – and this has repercussions in terms of delays [in] take containers out of the port; it creates traffic jams.

And then, again, you have shipping lines, with ships having to wait longer outside the port before docking. Sometimes these shipping companies decide to go to another port and then come back, which again creates additional delays and frustrations.

SIMON BROWN: So, short answer, it will be another year of supply chains. We’ll keep an eye on that.

Denys Hobson, logistics and pricing analyst at Investec for Business, I appreciate the early morning.

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