Global supply chain crisis could easily last through February

The global supply chain crisis will worsen before it begins to ease, one of the world’s biggest logistics groups says, warning disruptions in transpacific trade in particular could last beyond the lunar Chinese New Year in February.

A record 100 vessels on Tuesday waited to dock at the historically unproductive U.S. ports on the West Coast, according to Kuehne+Nagel, resulting in mammoth queues of, on average, two weeks before the ships can unload their goods.

“We would expect this can continue even longer than six or twelve months. There’s no sign of relief,” chief executive Detlef Trefzger told analysts on Wednesday. “This is a bullwhip effect we experienced. And it’s getting worse at the moment.”

All his Swiss company could do was recommend in some cases clients agree to drop anchor elsewhere and then fly their products to an onshore hub, or reroute ships just like during the Evergrande crisis. Otherwise, they warn, all they can do for customers is plead—like everyone else who’s been waiting—their case terminal by terminal to get expedited treatment.

With 72,500 employees at 1,400 locations in over 100 countries, the group is one of the world’s leading logistics companies and the largest sea freight-forwarding companies in the world.

Trefzger even took a shot at America’s key port infrastructure. He said he saw little sign of an improvement in the chronically low productivity of the west coast harbors, and little to no improvement following President Biden’s announcement last week to run the Port of Los Angeles around the clock. The White House said the expanded hours had the “potential to be a game changer.”

After working closely with my team, the Port of Los Angeles is announcing today that it will begin operating 24 hours 7 days a week — which follows the Port of Long Beach’s commitment.

A 24/7 system is what most of the leading countries operate on. Except us. Until now.
— President Biden (@POTUS) October 13, 2021

So far, the Swiss aren’t impressed.

“We still lack a 24-hour, seven-days-a-week service in some of those ports—despite political statements it’s not happening. And we have the high season now in the U.S. with Thanksgiving coming up soon and Christmas,” Trefzger told analysts.

As a result of the bottlenecks, the company was temporarily forced to reduce its business with less profitable bulk commodities shipping until the logjam eased.

Reports of snarled ports, meanwhile, seem to be triggering a related phenomenon that’s also bedeviling the logistics industry: companies over-ordering goods and materials under the expectation only a percentage will arrive at their warehouses, factories and showrooms on time.

As for Kuehne+Nagel, the company expects the supply chain woes to hit the American economy the hardest. But, adds the K+N boss, European ports are also experiencing problems, especially those with very little or no automation. Moreover clogged harbors were only part of the problem. Rail terminals were also congested and a trucker shortage exacerbated the problems, even if the worst of what it was seeing was centered in the United States.

The crisis is pushing freight rates higher, a benefit for companies like his. At 21.8 billion Swiss francs ($23.7 billion), Kuehne+Nagel’s net turnover in the first nine months of 2021 soared almost 50% higher year-on-year previous, while operating profit more than doubled to over 1.8 billion francs.