After a year full of crippling logistics bottlenecks, we feel a quick snapshot detailing the current state of supply chains in Asia is due. On the one hand, November recorded a notable amount of growth in Asian factory activity. On the other hand, however, rising commodity costs, ongoing equipment shortages, and the arrival of the new Omicron variant continue to stand in the way of a complete worldwide economic recovery.
And while Asian manufacturers experienced growth as a whole, “China’s factory activity fell back into contraction last month, the private Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) showed on Wednesday, Dec. 1, as soft demand and elevated prices hurt manufacturers,” according to Hellenic Shipping News. It’s not all bad news though — at least the power crisis and recent supply constraints seem to be improving somewhat.
Not to mention the fact that other countries like Japan, South Korea, India, Vietnam, and the Philippines are showing signs of PMI expansion despite China’s relatively weak performance. Japan’s PMI, for example, “rose to 54.5 last month, up from 53.2 in October, the fastest pace of expansion in nearly four years,” based on Caixin/Markit’s data. It’s only a matter of time before China catches back up again now that new export orders are rushing in and supply chains are learning how to work through equipment delays.
One of the most pressing concerns on container shipping professionals’ minds right now is how the Omicron variant will affect an industry that’s already so overwhelmed. Unfortunately, not much is known about the new strain other than how easily it can spread, and all we can really base assumptions on are the responses we’ve seen from global leaders to COVID-19 so far. This means shippers can definitely expect an increased risk of operational shutdowns and border restrictions at the very least.
The impact on demand remains even less certain given how unpredictable pandemic-driven buying behavior has been in the past, but we do know that Omicron is only one of the many variants out there acting as yet another hurdle to sustained progress. While many shippers look to multiyear contracts to improve carrier service levels, Asia-Europe traders, depending on seasonality trends are particularly struggling with record-level contract rates in the face of fairly limited alternatives.
According to Patrick Berglund, CEO of Xeneta “relative to historical rate levels, you will settle at the highest levels we have ever seen. Looking forward to January, we can see that those who have gone early and tendered have seen higher prices as the short-term market continues to soften.” Meanwhile, strengthening cargo volumes has prompted major ocean liners to start expanding their services to and from India.
Based on The Loadstar’s latest information, Singapore-based Samudera Shipping Line launched a shuttle service, titled the Nhava Sheva Singapore Express, between Nhava Sheva (JNPT) and Singapore in an effort to help optimize the route’s transshipment flows. This move directly follows Zim’s impending weekly container service between India (JNPT/Mundra) and the east Mediterranean.
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