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"The Great Supply Chain Collapse To Continue Into 2023"
by Epic Economist
"Chaos and panic have become commonplace across global supply chains. At this point, disruptions were supposed to be easing. Instead, experts say that problems are getting bigger and the situation is getting dramatically worse. What they’re witnessing right now is the combination of two years of continued breakdowns in addition to the bottlenecks caused by the Russia and Ukraine crisis, a new round of lockdowns in China, and record congestion at US ports. We’re being warned that in the best-case scenario, the global supply chain nightmare is going to extend until 2023. But lots of things can go wrong until then, so we should all start preparing for the worse.
Over the past 24 months, we have seen shortages of everything from lumber to fertilizer to semiconductors, which have resulted in price increases for everything from homes to appliances to cars, and even food staples. The conflict between Russia and Ukraine has only exacerbated the systemic failures supply chains were already experiencing, and also created a rush for oil and wheat on global markets. Despite the promises made by global leaders in 2021, like Federal Reserve chairman Jerome Powell who said that supply-chain disruptions and inflation would be "transitory," the glitches in the system are becoming more frequent instead of going away, and those same leaders are now scrambling to address the relentless surge in consumer prices.
To make things even worse, in China, issues that were only seen before during the peak of the health crisis in 2020 are emerging once again. Thousands of factories are being shut down, container ships are stuck at sea while cargo piles up on land, and blank sailings are making a comeback as the country faces its biggest virus outbreak since the start of the pandemic, with strict lockdowns and quarantine measures halting the delivery of goods in and out of the nation.
That’s leaving logistics operators extremely worried that like in 2020, today’s paralyzed supply chains will suffer from widespread chaos once lockdowns are lifted and the backlog of goods in Chinese factories and warehouses will turn into a flood of products bound for the US and many other countries all over the world.
On top of the new wave of infection cases in China, Toll Group Managing Director Thomas Knudsen sees a combination of factors in play, which are likely to take the supply chain crisis to a whole new level. That includes persistent congestion on the US west coast and a possibility of a port labor strike, and a shortage of new container capacity coming into the market, which will, in turn, prolong disruption and keep shipping rates at record highs.
Talking about how long the disruptions are expected to continue, Knudsen said: “If you're optimistic, another 12 months, if you're not, it could be all of 2023. I'm sure rates will remain elevated, and you'll keep on not being able to rely on a seamless supply chain”.
In short, that means our supply chains are in a very risky position. And the US's enormous reliance on exports from other nations is going to aggravate shortages and hit domestic production. The inflationary spiral we’re witnessing will continue to escalate until we have a full-blown nightmare on our hands. Making ends meet is going to become increasingly harder than already is, and the shortages and the price hikes are just going to escalate in the months ahead."
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