Positive signals coming from supply chain crises

Transportation costs, commodity prices, vaccination rate, strong Q3 earnings signals that stress in supply chain may ease.

Positive signals coming from supply chain crises

While ongoing supply bottlenecks in the global economy remain a major concern, some indicators such as shipping costs and commodity prices suggest that pressure on the supply chain may be easing.

However, some experts warn that the current supply chain disruptions will continue until next year.

Supply chain issues such as rising raw material prices, computer chip shortage, port congestion, and shortage of truck drivers are the biggest problem in the global economy.

While supply chains struggle to recover, indicators such as transportation costs, commodity prices, vaccination rate, and firms' positive third-quarter earnings are signaling that the stress in the global supply chain may be easing

"I think there is a long way to go before the current supply chain disruptions are completely resolved, and they will certainly persist into next year," Moody's Analytics senior economist Tim Uy told Anadolu Agency.

Noting that the governments around the world are doing what they can to ease port congestion, Uy said: "There are also private companies that are hiring more truck drivers and coming up with creative ways of getting around the current bottlenecks, but shortages in port and rail workers, warehouse space and other transportation equipment, as well as truck drivers make this a very difficult problem to solve."

Uy underlined that the situation could get worse over the holiday season this year, before getting better in the middle of next year.

"By then, demand will have eased somewhat and supply would have adjusted to these bottlenecks and the combination of those two things should reduce the burden on the whole system," Uy added.

Other indicators

The Baltic Dry Index (BDI), a major indicator of shipping rates, showed a falling tendency after hitting the highest level since 2008 with 5,650 at the beginning of October.

The index, which is one of the leading indicators of the global economy, is below 3,000 points as of Oct. 4.

According to data from shipbroker Alibra Shipping, six-month contracts for Atlantic and the Pacific Ocean routes cost $54,000 and $52,500 a day, respectively, for the largest dry cargo vessels (capesizes- 150,000 tons).

While congestion has eased at most ports in China, the Long Beach container port in Los Angeles is reportedly still busy.

It is expected that the slowdown in China's GDP growth may limit the rise in commodity prices, while the weak real estate market will cause a decrease in iron ore prices.

Beijing began stabilizing energy prices after blackouts led to factories and mine shut down. While these steps pushed coal futures to record highs, they also hit metal prices.

Lumber futures, an important residential construction component in the US, also hovered 60% below the levels in March.

It was noted that the outlook for the chip is darker

While global data provider IHS Markit said chip shortage may cut global light vehicle production by 5 million this year, some automakers pointed out that restrictions could last until 2022.

Asian-based carmakers like Toyota, on the other hand, suggest that 'the worst [has been] left behind'.

Hüseyin Demir