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October 26, 2021
EDITORIAL OP-ED OPINION POINTS OF VIEW

Trucks and container shortages stretch supply chains

Macro commentary by eToro analyst for Romania, Bogdan Maioreanu

 

Empty shelves in stores, cars queuing for kilometers to petrol stations, a sight that Romanians were so used to before 1989, is the current norm in Great Britain. It is not the produce or the fuel missing, but the truck to take the goods from suppliers to the stores. The U.K. ‘s Road Haulage Association (RHA) says Britain needs 100,000 more drivers if it is to meet demand. This situation was caused partly by Brexit and Covid-19, and the loss of about a year of driver training and testing. The secretary for Transportation Grant Shapps has claimed Brexit is not to blame for the current HGV driver shortage that has hampered the UK’s supply of petrol and diesel. However newspapers are not agreeing with Shapps and are reporting that the government would allow up to 5,000 foreign drivers into Britain on short-term visas in an attempt to curb the crisis. This is a measure that logistics companies and retailers have demanded for months but which the government had previously ruled out.

In the rest of Europe, while the shortage of truck drivers is not as extreme as in the UK, it is still an issue. In Germany, the BGL – The Federal Association of Freight Transport, Logistics and Waste Disposal – is estimating a deficit of 60-80.000 drivers, and warns that Germany is on the same path as Britain. This deficit is also already affecting Romania who is dependent on trucks for an important part of our imports and exports  – 49% of the country’s exports are made to 5 western European countries with Germany leading with 22.8% of total. As for the imports still Germany is in front with 20.8%.

The economy restarting after Covid-19 lockdowns created all sorts of pressures over the production and the supply chains. One of the results of increased demand is the transportation shortages leading to price increases. Trucks are not the only ones creating issues.

Some extreme shortages are happening in overseas container shipping, where prices skyrocketed. For example, the shipping price of a 40 foot container from Asia to the US increased from 1500 USD before the pandemic to 20.000 USD and even more, now. Though the EU mentioned in a report that the influence of transportation prices increases is limited in the final price of the goods, if the situation continues to deteriorate we are likely to see at least a fraction to be passed to the final buyer. The freighters are starting to take measures against the price spiral, with the French container shipping company CMA CGM, the world’s third-largest ocean carrier, announcing recently that it will halt all spot rate increases through 1 February 2022 in order to prioritise its long-term relationships with customers. German shipping company Hapag-Lloyd has also suspended increases. But a lot of containers are in the hands of forwarders and resellers that will continue to increase prices as long as the demand exceeds the offer.

There is a strong scenario in which the freight prices continue to rise. Competition for ocean freight capacity has intensified as economies open up further and inventories are rebuilt across the several links of supply chains. There is no alternative that can fully replace maritime shipping, traditionally the highest volume and cheapest cargo option, and while some large economies are producing more now than before the pandemic, freight is creating congestion and bottlenecks in ports adding to the delays in shipping and increasing costs.

As with other industries, new shipping capacities are built, new orders for container vessels reached a record high of 229 ships with a total cargo capacity of 2.2 million TEU but this will represent 6% increase over the current capacities and will become operational in 2023.

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Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.

About eToro Group

 

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