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Logistical Chaos: Congestion in the world’s ports, lack of containers and…

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The increasingly frequent discussions about the current scenarios of scarcity of inputs and, consequently, about the inflationary process that is registered worldwide, also call attention to the logistical crisis, with congestion in ports around the globe. According to international journalist specializing in commodities Karen Braun, at the terminals at the port of Shanghai, China alone, the number of ships waiting for berthing increased by 34% compared to last month.

“The lockdowns due to Covid-19 in China have worsened the problems of the global supply chain. It is estimated that a fifth of the world’s fleet of container ships is stuck in the congestion of ports not only in China”, explains Karen.

The image below, provided by the specialist, from the company Refinitiv Eikon, shows the congestion of vessels of all types, including bulk carriers and container carriers. China’s coast is one of the most congested, if not the most.

port congestion
Image: Refinitiv Eikon + Karen Braun

The following image is the one that refers to the ships carrying grain and it is possible to observe the enormous concentration of them in the Chinese coast.

Bulkers
Image: Refinitiv Eikon + Karen Braun

Thus, all this chaos and this considerable reduction in maritime logistics efficiency around the world also takes into account the evolution of agricultural commodity prices in international markets. In the coffee market, the problem has been worrying since mid-2020, when the coronavirus outbreaks had not even spread across the world.

The week is ending with a strong feeling of risk aversion, according to market analyst Eduardo Vanin, from Agrinvest Commodities, and part of this feeling has been, for months, fueled by these delays and logistical uncertainties that continue to worsen.

“China remains stuck with its zero-covid policy, the service sector in China is under strong pressure, companies thinking about leaving the country and 25% of the world’s containers stopped, leaving supply chains increasingly stressed,” he says.

The picture is already worrying and there is still room for interest rate hikes by the Federal Reserve in the US, in addition to “US mortgage interest rates rising sharply, company costs rising and consequent squeeze on margins, IT companies delivering lower-than-expected profits.” As expected, sanctions on Russia have not had the expected effects, oil close to $110 a barrel. Anyway, that’s a lot of bad news for just one month. It’s very difficult, with all this sentiment, grains to be left out”, he adds.

In addition to agricultural commodities, all of which are stopped in these containerships or bulk carriers, there are still raw materials for these products to be produced and, at the moment, the most serious problem is among fertilizers. The delivery of fertilizers has been compromised in several key countries in global agricultural production, including China – also due to the zero tolerance policy against the coronavirus – and the United States.

“They are saying that the delivery of soy seeds and chemicals is very slow, which may favor the planting of corn. CF Industries once again commented that the delivery of fertilizers to American producers will be a great challenge this year. of wagons, the longer waiting time in the yards and the general reduction in the efficiency of the American railroads would be the justifications”, says Vanin.

What is observed in these first months of 2022 is the result of the shock of disruption that the pandemic has brought to the world in the last two years. Currently, there are more than 40 cities in lockdown in the Asian nation.

“For global chains, these last two years in China have been purgatory. Lack of components, delays in receiving and shipping cargo, missing trucks, lost cargo, perishable cargo being lost, higher costs and “bubble production” systems. “. Successive lockdowns, power outages, new anti-pollution laws, new anti-speculation laws, lack of trucks and inability to pass on costs to companies serving the domestic market. According to the European Chamber of Commerce, many companies are thinking about leave China”, details the Agrinvest analyst.

The logistical crisis is also feeling the effects of 70 days of war between Russia and Ukraine. And a headline from the Bloomberg news agency shows that the next could be the conflict effectively reaching the Black Sea, which could further jeopardize the arrival and departure of products through the region.

sailor ukraine
Guard soldier in the Black Sea – Photo: Aleksey Filippov/AFP/Getty Images

“The Russians seem willing to cut the Ukrainian economy off access to the sea – essentially recreating the Anaconda strategy that US President Abraham Lincoln used in the 19th century to smother the Confederacy.

But Russian success is hardly guaranteed, as the Ukrainians are proving as surprisingly robust at sea as they are on land, already carrying out a handful of successful engagements against Russia’s naval forces,” Bloomberg reported.

With logistics sharing space on traders’ radar and raising concerns that are, therefore, increasing, risk aversion is really quite present. Only this Friday, after a completely volatile and intense week, soybean and corn futures closed this Friday’s trading session with significant losses, led by soybeans. The oilseed ended its trade on the Chicago Stock Exchange losing more than 23 to 25.75 points, taking July to US$16.22 and August to US$15.71 a bushel. In corn, the losses ranged from 11.50 to 17.75 points, with July being quoted at US$ 7.84 and September, at US$ 7.42.

Also at CBOT, soybean meal and oil were sold, also after having registered a very volatile week. On the New York Stock Exchange, cotton and coffee plummeted more than 3%. Oil, following its fundamentals, closed in a positive field. The restricted supply is still a market concern – which keeps sea freight and all others at very high levels, in addition to other variables – despite demand from China – due to the continuity of the lockdowns still generating some uncertainty.

On the other hand, only against the real, only this Friday, the dollar rose more than 1%, taking the American currency to R$ 5.08.

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