top of page

Shipping Chaos Turns Violent

For the last two years supply chain has faced a large number of chaotic events at various points of time but the current phase of chaos is of larger proportion than previous events combined.

If the past few months of various reports were optimistic about the delivery times and shipping industry problems reducing. The combination of the Russia-Ukraine conflict with China's large-scale covid lockdowns is a big hammer to any improvements in recent.

The main cargos that provide the shipping and customers with regular cash flows are oil and agriculture-related trade. And these are the two largest hit trades due to the reasons mentioned earlier.

The exact reason can be understood by an example of Russian oil cargo. Earlier crude oil and related products from Russia were mainly being sold in Europe. This required only Aframax ships that we're able to dock at main oil ports in Russia. Now that most of the products will be sold in Asia or other far distant countries they need to be loaded in VLCC. These large size ships cannot dock at the main oil ports in Russia. Thus, when China or other countries use VLCC to get the oil that is heavily discounted from Russia the VLCC to get the oil that is heavily discounted from Russia the VLCC capacity will reduce in terms of availability.

In another example, due to China's restrictions the time taken for ships to dock and exit at major ports has increased by thirty to forty percent. This has brought many fields to increase the traffic near these ports and reduce the availability of vessels.

Though container rates have reduced from highs for now as these adjustments occur but soon due to these lags and sentiment hampering there will be a slowdown globally that might hamper inflation.


Commenting has been turned off.
bottom of page