Wednesday, March 2, 2022

"The Countdown For A Global Supply Chain Breakdown Has Begun!"

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"The Countdown For A Global Supply 
Chain Breakdown Has Begun!"
by Epic Economist

"A global supply chain breakdown is on the horizon, and it is likely to cause unforeseen damages all across the industry, accelerating the decay of this complex dynamic system, and disrupting global trade for a prolonged period. That means our domestic food and energy supplies are on the line, and according to experts, if the global outlook doesn’t improve in the near term, we might soon have to start rationing food.The shipping industry is being seriously impacted by the escalating tensions. A new analysis indicates that the industry is set to face an even worse labor crunch as over 15% of the world's seafarers come from the two countries.

Last week, the U.S. imposed sweeping restrictions on Russia’s financial sector. However, such sanctions are likely to have far-reaching and unintended consequences for the United States and the entire world. Industry strategists are warning that Western restrictions are going make it difficult to pay seafarers from both countries, which will consequently lead to a manpower shortage all across supply chains at a time the sector is already plagued by a severe scarcity of labor.

According to a report released by Tradewinds, citing shipowners and ship managers who supply workers to vessels, if shipping companies have problems moving crew in and out of both countries that could also result in another crew change crisis. Adding that to the lack of payment, millions of seafarers could simply exit the industry, leading to the aggravation of delays and disruptions all over the globe.

“An offensive or land grab could sharply reduce grain production as farmers flee the conflict, agricultural infrastructure and equipment are damaged, and the region’s economy is paralyzed,” said BRS. Moreover, the most recent spike in crude oil prices and sudden increases in insurance charges will continue to inflate global shipping costs in the coming weeks and months. International Brent crude oil prices already topped $105 per barrel, hitting the highest level since in almost a decade.

According to a Goldman Sachs analysis, even though there are congestion hotspots around the world, with millions of containers backing up across almost every trade lane, the issue is significantly worse in North America. For almost two years, experts and market strategists have been alerting about the negative repercussions of port congestion for global trade and urging the U.S. federal government to take proper action to mitigate the crisis. Unfortunately, government measures have seemingly backfired, causing even bigger backlogs all across the coast. Now that shipping lines have been reduced and carriers are avoiding backed-up ports, those unsolved issues are back to bite us.

Everything we buy and consume requires transportation, and soaring oil prices will be felt throughout the entire economy in many different ways. Inflation is already making millions of Americans struggle financially, and to make the situation even more complicated, the confrontation between Eastern and Western forces is going to impact food prices very aggressively.

“This could not come have come in the worse time,” lamented Robb MacKie, president and CEO of American Bakers Association. With grain prices already on the rise, the conflict abroad is placing even more pressure on a still ailing supply chain, he says.“Depending on how this comes out and how long it goes, farmers may not be able to plant spring wheat, corn, and other things. So, they might go a year without any crops,” MacKie continued.

Keeping in mind that we were already on the cusp of a global food crisis even before the tensions started to escalate, a decline in production would be disastrous. “If the conflict is prolonged, the consequences could be really serious,” Andree Defois, president of consultant Strategie Grains, told Bloomberg. “Grains will need to be rationed,” he warned. This is the worst global supply chain crisis we have faced in history, and the current global outlook is unlike anything that we have seen since the late 1940s. If conditions continue to worsen, the collapse is going to hit us much sooner than most people expected. The countdown for a global supply chain breakdown has begun, and the months ahead are going to be extremely painful for each and every one of us."

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