Supply Chain Normalization?
February 9, 2022
World’s Top Shipping Exec Says Worst Supply-Chain Snarls Have Peaked
by Tyler DurdenWednesday, Feb 09, 2022 – 11:11 AM
AP Moller-Maersk suggests the climax of global supply-chains snarls has passed, and bottlenecks will alleviate in the second half of the year. There are emerging signs major transpacific shipping freight rates are at a critical inflection point.
“We are guiding in an environment where we are coming out of a pandemic, and we don’t have much experience with that to be honest,” Chief Executive Officer Soren Skou said in a Bloomberg TV interview.
“So we are saying we expect quite a strong first half of 2022, and then we expect what we call a normalization early in the second half,” Skou said.
The top shipping exec expects transpacific shipping rates to decline as COVID restrictions are lifted, leading to the easing of congestion at the US’ largest container ports, ones located at Los Angeles and Long Beach on the US west coast.
“We are trying to guide as best as we possibly can, not to be optimistic or pessimistic,” he said. “We do not have much visibility to what will happen when people return to work, when bottlenecks open up and a lot of the capacity tied up today in Los Angeles and Long Beach gets released — how is that going to work out. We’ll have to see.”
There’s growing consensus on Wall Street, especially with JP Morgan, as one of their analysts told clients days ago that global supply chain constraints have peaked. A leading indicator of this is major shipping rates which have slumped in recent months.
The exact timing of the normalization to the shipping industry is unknown, considering there’s no data of coming out of a virus pandemic. Though the world’s top shipping exec says it could happen as soon as this summer.
If peak congestion has already hit, this would suggest chip shortages could diminish later this year, thus increasing new vehicle production and possibly topping out used car prices.