Supply chain update
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One of the world’s largest port and terminal operators warned that the global shipping and supply chain crisis that has left empty shelves in commercial streets can only be resolved by slowing consumer demand.
Morten Engelstoft, CEO of Maersk’s APM Terminals, said that the surge in demand has put pressure on container groups, suppliers and logistics companies because they are trying to deliver goods, which has caused “malignant cycle”.
“We need to figure out how to break this vicious circle,” said the boss of APM, the port and terminal division of the world’s largest shipping group, in an interview with the Financial Times.
“We need to lower [consumer demand] Growth, allowing the supply chain time to catch up, or spreading growth in different ways. In a long time, we will need to restore efficiency. “
Although acknowledging that ports need more investment to improve infrastructure, he emphasized that the soaring consumer demand in the United States is the cause of system pressure.
U.S. imports of goods in July increased by 20% from the previous year and by 11.5% from 2019. The reason was that consumers were profligate and their spending has been supported by stimulus measures since the second half of last year.
Engelstoft said that the percentage increase in U.S. imports and exports has led to a much larger increase in volume than elsewhere.
“This is a huge percentage of the volume. The scale of the business is huge, with port capacity, truck drivers, warehouses, and even the number of manually operated equipment all creating bottlenecks.”
Due to a global shortage of truck drivers and limited warehouse space, congested ports are being hit, leading to further delays in deliveries that were interrupted by the Covid-19 crisis.
Since the beginning of the pandemic, congestion at the ports of Los Angeles and Long Beach, California reached its peak last week-this is the main gateway for Chinese cargo to enter the United States, and APM has a terminal.
More than 40 container ships berthed outside the port waiting to be berthed, breaking the record in February.
Retailers and wholesalers in the U.S. and Europe are also worried that supplies may be interrupted during the peak season before Christmas.
In addition, retailers have increased the pressure by stocking up for Black Friday (the day after Thanksgiving in the United States in November, the traditional start of the Christmas shopping season), and it is unlikely that the pressure will ease before 2022.
Alex Hersham, CEO of freight booking platform Zencargo, said that demand may slow during the Lunar New Year period in February, giving the shipping industry a chance to catch up with the backlog.
But even if there is a slowdown, some executives have warned that the need to restore depleted inventory will reduce the likelihood of a reduction in freight volumes, which are usually four to six weeks before and after the Chinese New Year.
Brian Sondey, CEO of Triton International, the world’s largest container leasing company, said the number of containers was “too large to be emptied during that window.”
“The consensus in the industry is that we are unlikely to see an improvement before next year,” he added.