Was Covid the only reason for the shipping crisis and when will it stop?

covid 19

 

Covid 19 has exacerbated global supply chains troubles

For a long time our ultra-connected global system supply chains have worked smoothly for just-in-time delivery. But now things are looking grim. There were double the number of container ships off the ports off the California Coast in September as there were in August, and congestion is worse in China. As someone said, it seemed to work well until it didn’t. Something happened. Toys won’t be arriving for Christmas in USA, New Zealand is short of chia seeds and turmeric and Irish builders won’t get their timber. To add to our woes, small and remote New Zealand has been victim of the post-pandemic business model reviews by global shipping and building supply companies. So New Zealand was dropped off their supply routes, with supplies getting only as far as Australia.

So was it already fragile to begin with, or did the upheavals of Covid make it so? When will it improve?

Three predictions are worth examining.

“Global shipping mess to last until 2023”, says Jackson Meyer, CE of an Australian freight forwarding company.

Secondly an overdramatic “City Prepping” guy (apparently called Kris, but it takes a hunt to find it) concludes in his YouTube story of 3 October 2021 that, “Barring new Covid developments, natural disasters, strikes at major ports, fuel supplies and panic buying things could begin to a sort of normal in 2022.”

Thirdly – and probably the most realistic forecast – Forbes produced a comprehensive summary of the problem September 3, 2021 and concluded there is no end in sight.

“A chain is only as strong as its weakest link, so the saying goes. When it comes to the current state of the global supply chain, weakness is everywhere. Massive dislocations are present in the container market, shipping routes, ports, air cargo, trucking lines, railways and even warehouses. The result has created shortages of key manufacturing components, order backlogs, delivery delays and a spike in transportation costs and consumer prices. Unless the situation is resolved soon, the consequences for the global economy may be dire.”

Forbes notes that various natural disasters already affecting the supply chain. “The ports of New Orleans, Baton Rouge, Gramercy, and Morgan City in Louisiana and the Port of Pascagoula in Mississippi remain closed following the recent arrival of Hurricane Ida.”

Severe rail disruptions after Hurricane Ida in Louisiana as well as port damage

And extreme weather events hit other sectors too. Hurricane Ida forced the Kansas City Southern KSU rail network to shut its main line in Louisiana.

And the trucker shortage isn’t going away either, despite a recent increase in wages. Even Walmart was offering twice the median salary of a trucker. As one truckie related in a YouTube video, “Because of Covid, we are stuck in our trucks all night and we ain’t got no food.” Forbes says, “According to driver recruiting firms, there is one qualified driver for every 9 job postings”.

And of course, all this is leading to inflation. Or more likely stagflation which is a rise in prices accompanied but no growth of jobs.

The number of container ships off the California coast keeps on increasing due to port congestion

Now looking back at the prepper’s four provisos, it seems:

  1. There isn’t a guarantee that we will have no new Covid variants. It seems there are seven already and Delta looks the worst so far. But Mu and Lambda and C.1.2 also exist. Mu, discovered in January 2021 is in 45 countries already.
  2. Given climate change, there will be no end to the weather disruptions of supply chains so forget that. Just read your IPCC reports. They will get worse not better.
  3. Fuel supplies won’t stay the same. They will just get worse. The peak year for production of conventional oil was 2006 and for non-conventional oil over a decade later. Discoveries of big oil reserves are a thing of the past. Most oil producing countries have past their peak oil production. Although there are many factors to be added including political tensions as oil, gas and coal producing countries now tend to keep their fuel for themselves. Add to that the serious trade tensions with others, the general trend now is for prices to rise. Brent crude oil is hovering between $75 and $82 a barrel.
High prices for natural gas are shutting fertiliser plants in UK and this is having a huge effect on their meat and soft drink industry because they rely on the byproduct of fertiliser production

Already the natural gas supplies from Russia are closing down fertiliser companies in UK, and this has spread to Belgium, Germany, Austria and Norway. Since carbon dioxide is a by-product, it is affecting meat and soft drink industries. Natural gas is used in Britain and Europe for electricity generation and electricity prices are skyrocketing. This is affecting food supply from Netherlands’s greenhouses.

When it comes to coal, China’s coal sources changed after a spat with Australia. So while China searches for new suppliers, the price has risen, affecting power generation and closing down Tesla and General Motors and Apple factories and causing traffic light failures there. (Not to mention leaving households in the dark with no way to cook or heat their homes.)

Our over-dependence on fossil fuels is now slowing global GDP growth because, as we use up the easy to find fossil fuels, and progress to poorer quality oil, coal and gas it is taking more energy to get energy. It is more and more expensive to mine them. So there is less energy for the general economy. This happened well before Covid but few economists noted the energy issue.

4) Will panic buying stop? Maybe. In 2020 Covid caused a change in consumer buying habits but we don’t know if this will continue. During their enforced lockdowns of early 2020, many ordered online and there was a big surge in orders while manufacturers and docks had laid off workers, at the very time truckies were departing in their droves. As lockdowns appear to come in waves, who knows when or if this panic buying will cease.

Given these three scenarios, it is more likely the troubles will spread.

But did all this happen just because of Covid? No. Guardian Journalist Matt Stoller in an article outlines the scenario before Covid. He explains the consolidation of power into the hands of monopolists over the last four decades has left us unprepared to manage a supply shock. “The lax anti-trust, deregulation of basic infrastructure industries like shipping railroads, and trucking, disinvestment in domestic production and trade policy emphasising finance over manufacturing.”

Four firms bought out the biopharmaceutical equipment industry over the last 15 years. Wall St consolidated 33 firms into just seven after 1980. Wall St-owned rail-yards cut their workforce and closed a giant Chicago sorting facility. Deregulation of ocean shipping brought consolidation into three giant alliances.

The truck driver shortage is also a story of deregulation leading to lower wages, worse working conditions. In semiconductors there is but one firm controlling the industry, Taiwan Semiconductor. And so on.

As you can see, before Covid, the ultra-efficient system of global manufacturing, transport and retail was already vulnerable in the extreme due to consolidation of power, lower net energy return on investment and extreme climate events.

And all it needed was the black swan of Covid. The interruptions have already lasted a very long time. It may be a tipping point from which the global economy cannot really recover.

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2 thoughts on “Was Covid the only reason for the shipping crisis and when will it stop?”

  1. Great appraisal. Added to that is the debt / no ability to raise interest issue. Given that all money (and it’s only digital representations in computers, nowadays) requires belief, we are a blink away from seizure in the financial system. Which would immediately stifle everything else.

    1. Yes I missed that. Haven’t been visiting Nate Hagens enough lately. Just posted another blog Murray on transitioning to renewables. Must focus on money and debt for the next one.

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