Global supply chain crisis could last another two years, warn experts

Although there are signs that some bottlenecks are easing, the onset of the Omicron Covid variant could lead to new shutdowns, sending another disruptive spasm through the global system.

Maersk, one of the big three shipping companies, said the worst delays were still on the US west coast where ships were waiting four weeks to unload due to the lack of workers on land.

As well as the possible shortages of Christmas drinks and sugar for festive treats, economies such as the UK and US are facing rising inflation across a range of goods from energy to apples as a torrent of demand puts pressure on insufficient supply.

Shipping accounts for the movement of at least 90% of goods around the world and the cost of transporting things by sea has rocketed in the past year. For example, the Drewry world container index measuring the cost of moving a 40ft container is 170% higher than it was a year ago. The price on some particularly in-demand routes such as Shanghai to Rotterdam has increased by almost 200%; in the case of the Dutch port to New York, the cost has risen by 212%.

Basic consumer staples are spiralling in price because of higher shipping costs and heightened demand from consumers stuck at home for months and unable to spend any money on treats such as holidays and nights out. Coffee prices have doubled over the past year, according to current data, as has the price of oats. Lumber, cotton, wheat and palm oil have all risen by more than 30%.

Not surprisingly, inflation has touched decades-long highs in western economies such as the US, Britain and Germany, bringing calls for an end to the ultra-loose monetary policies pursued by central banks since 2008.

Roy Cummins, who has worked in logistics for 30 years and until recently was chief executive of the Port of Brisbane in Australia, said there was some sense that things were improving but he estimated that constraints on the international shipping network were unlikely to be alleviated for the next two years.

His point is illustrated by the bottleneck of giant containers that has built up off the west coast of the US. With so many ships unable to dock and unload, more than 80% of the 434,000 20ft containers exported out of the Port of Los Angeles in September went out empty. Shipping companies can make up to eight times more money taking goods from China to the US, so it made sense to get the containers back to Asia rather than wait for them to be filled.

The deterioration in relations between the US and China which led to trade tariffs and loss of trust was also having a bigger impact than hitherto recognised, he says, dislocating the mechanics of world trade that have been taken for granted for many years. Cyber-attacks and robotics have also made companies review their supply chains and source materials closer to home.