How Omicron is Adding Further Pressure to Global Supply Chain Crisis

It may be the start of a new year, but it seems the ‘ripple effects’ of the Covid pandemic will not disappear any time soon and will continue well into 2022 and beyond, as the Omicron strain of Covid creates more havoc for the supply chain across the globe.

Some bottlenecks may now be easing but others are only just beginning due to the Omicron Covid variant, which has led to experts to predict that the global supply chain crisis could last another two years and “won’t’ return to normal anytime soon”.

New shutdowns, such as the one in the Chinese manufacturing hub of Zhejiang, which is home to the largest port, Ningbo-Zhoushan, has seen tens of thousands in quarantine in line with China’s strict zero-Covid policy following a Covid outbreak in the area.

Economists and industry experts believe the already weakened network of world trade, due to shipping backlogs and labour shortages, along with geopolitical tensions, will remain “discombobulated”. 

The worst delays remain on the US west coast where ships are waiting four weeks to unload due to labour shortages on land, according to Maersk, one of the big three shipping companies.

This backlog then creates a “ripple effect” around the world with ships locked into strict deadlines and an excess of containers in ports in the US and Europe, whereas in Asia there isn’t enough. 

“With winter, year-end holidays in North America and Europe, Chinese new year in Asia, the already stretched supply chain will get even further stretched as workers, truckers and terminals are off for holidays,” a Maersk spokesperson said.

“Normally we can absorb these seasonal impacts fairly quickly, but when already stretched, it just becomes a multiplier.”

“We do not see major improvements as long as we have line of sight, which is into 2022 ... Very likely that it continues thereafter and for North America even longer.”

The UK’s biggest container port, Felixstowe, remains gridlocked with containers which are waiting to be emptied. This means that empty containers coming back on trucks from inland warehouses have to be diverted to other ports.

Robert Keen, of the British International Freight Association, said driver shortages were being felt all over the world with port infrastructure not keeping up with the container vessels. Covid was “an ongoing problem”, he said.

Flavio Macau, an associate professor specialising in supply chains at Edith Cowan University in Western Australia, said that the world economy was still suffering from a kind of “high blood pressure” as it lurched from one disruption to another. 

“My view is that supply chains still have high blood pressure, consistently showing arrhythmia. It will take to mid-2024 to get back to “normal’,” he said.

There are also fears that economies such as the UK and US will now face rising inflation in goods, from energy to basic necessities, as a surge of demand has put pressure on insufficient supply. 

Shipping accounts for the movement of at least 90% of goods around the world and the cost of transporting goods by sea has rocketed in the past year.

Dennis Unkovic, a US corporate lawyer, trade expert and author of Transforming the Global Supply Chain, said: “For anyone expecting the post-pandemic world to return to ‘normal’, forget it. Whatever was considered normal before the pandemic is not coming back.

“Companies have to make the supply chain a priority. If it breaks down we can’t say we didn’t see it coming.”

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News source: The Guardian