Central bankers and shipping lines warn of consequences of supply chain overheating

Central bankers around the world appear to have started to realise that the supply chain friction being encountered around the world is a significant problem.

Jay Powell at the US Federal Reserve, Andrew Bailey at the Bank of England, Haruhiko Kuroda at the Bank of Japan and Christine La Garde have all commented on the impact that supply chain friction was having on the prospects for inflation and growth. Speaking at a conference for central bankers in Portugal yesterday, Christine La Garde said that in areas such as shipping or semiconductors the problems “seem to be accelerating” and that “how long these bottlenecks will take to fade out is a question we are monitoring very closely”. Jay Powell seemed to admit they were taken by surprise, commenting “what people didn’t see coming was the supply-side constraints…that was a surprise…it’s not that our inflation models are wrong, although they certainly are not perfect, just the scope and persistence of the supply-side constraints were missed.”

Whilst it is difficult for central bankers to keep up with complex economic developments, many of these problems being evident to those for, example, in marine logistics in Q3 or Q4 last year. What is more concerning is that the problem may be more acute than the central bankers realise.

Speaking to the Financial Times around an event on adopting new fuel technology, Takeshi Hashimoto, CEO of Mitsui OSK Lines, made an ominous statement about the state of the container shipping market. Warning that Governments may need to intervene to “restore order” he said that “if left entirely to the market economy, individual companies and individuals all doing their utmost to find the best solution for themselves will result in more and more turmoil and an out-of-control situation,”

Whilst it is slightly surprising that the CEO of a private sector company would advocate state intervention in the market, it is a signal that logistics managers are becoming concerned about the trajectory of an increasingly overheated shipping market. Mr Hashimoto’s comments imply acute disorder in the shipping market, both in terms of price and availability. Such a level of disorder will threaten the viability of many supply chains and have severe implications for the global economy generally.

Logistics and supply chain managers probably should start considering that the present problem of price and availability in markets such as road, rail, airfreight, shipping but also areas such as warehousing, may become considerably more severe in the short-term with the potential to threaten the existence of certain companies and cause acute macroeconomic problems.

Source: Transport Intelligence, 30 September 2021

Author: Thomas Cullen