The prospects of maritime traffic in times of war and inflation

In recent months, we have witnessed a gradual rise in inflation levels, triggered first by rising energy prices and difficulties in accessing some raw materials, and then by the Russian invasion of Ukraine. The effect of this inflation process on the movement of containers does not seem relevant, at least so far. Very notable levels of activity continue to be recorded, both around the world and at Spanish ports, but the likelihood that high inflation rates could curb consumption and with it container traffic is starting to rise.

There is no doubt that significant increases, such as increases in prices, reduce the purchasing power and purchasing power of consumers. And those with a certain level of savings will be able to maintain their consumption levels, at least temporarily, while those without access or with little debt capacity will have to buy less. The drop in demand will sooner or later lead to a reduction in trade and therefore in the movement of containers.

At the same time, it was pointed out that the gradual increase in freight rates (the cost of maritime transport) since overcoming the most difficult stage of the pandemic has fueled the fever of inflation by making transportation more expensive and attractive. bottle necks in global supply chains. Although freight rates have dropped on some routes in recent weeks due to the occupation of Ukraine and the shutdown of some major Chinese producers to contain new covid outbreaks, this trend appears to be changing very soon. Trade flows were reactivated ahead of the summer when the planned reopening of parts of the Chinese economy began, which is currently slow and is causing a notable drop in activity in major Chinese ports (especially Shanghai). Meanwhile, waiting times are getting longer and logistics operators are looking for alternative ports, forcing unpredictable land movements that increase shipping costs and create new bottlenecks.

On the other hand, both the collapse of some ports in Asia and the uncertainties foreseen by the major economies of the region since the outbreak of the pandemic contribute to the contribution of large multinational companies that have repositioned a relevant segment. Some of the production processes in these Asian countries are considering redesigning to find locations closer to demand.

All these factors can cause traffic redistribution in the second half of the year and even later, with changes in origins and destinations. As a result, the influence of factors such as the war in Ukraine, inflation or bottlenecks in the logistics system can be very heterogeneous and show a different profile in different parts of the world. Therefore, for example, in countries that export energy products, a significant increase in national income is expected, which may translate into greater imports of consumption and investment goods, resulting in an increase in trade and maritime transport. At the same time, we will see that inflation will change the relative supply costs of different markets, causing some products to change geographical origin and distribution routes, which will translate into changes in the logistics system.

Some experts weighed the possibility that a temporary slowdown in trade could be beneficial by removing some of the pressure on supply chains and giving them a temporary time to reorganize to make them less vulnerable to congestion. However, I think it is too early to reach this conclusion. We do not yet know how long the uncertainty will last, how high inflation will rise, and how it will affect costs and prices in different sectors and in different parts of the world.

Supply factors will also be key, as the industry’s ability to adapt is crucial when taking advantage of the margins of restructuring resulting from the slowdown in shipping. If this happens, there will be less goods to be transported, even temporarily, less congestion at ports, more flexibility to adapt to flows of supply and demand, and to manage the filling of containers. This, in turn, should allow the logistics system to be reconfigured, taking advantage of the economies of scale of the ships, to align the efficiency associated with the maritime segment with that of the land segment in which they are located. jobs that often change with fewer periods of activity.

In this area, innovation will be essential and will once again emerge as a decisive factor in the ability of operators to adapt to changes. Those who place more bets on innovative strategies in a framework where the transformation towards sustainability is as urgent as it is necessary will have more flexibility to face the challenges of this new phase. Small ports like Alicante that cannot compete on scale must do so in innovation and sustainability and make the greatest possible contribution to this transformation process.

Source: Informacion

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