Supply chain compression intensifies as Christmas approaches

Good evening,

Supply chain pressures appear to be slowly easing and stifling global business.

Today we report how the cost of global air freight has reached record highs as businesses attempt to meet growing demand in the crucial period leading up to Christmas.

Container shortages and port congestion are still intense. In Los Angeles – the destination of around 40% of Chinese imports – around 75 container ships are waiting to dock, according to logistics group Kuehne + Nagel, with some stranded for weeks.

This left many companies with no choice but to switch to air freight, leading to a doubling of prices on key routes connecting Chinese manufacturers to US and European consumers.

The grounding during the pandemic of passenger planes, which normally carry half of the world’s air cargo, compounded the problem.

The $ 95 billion global toy market is a clear victim of supply chain compression, forcing Western companies to rethink their dependence on China, which accounts for 80% of global toy exports. With rising costs for energy and raw materials as well as shipping, the country is no longer as cheap a manufacturing base as it once was.

Lego, the world’s largest toy maker, announced a $ 1 billion investment in a new factory in Vietnam last week, as France succeeds in building a domestic production base.

But aside from “gut-relocation,” there’s another way to ease the pressure, Alan Beattie reports in today’s Trade Secrets newsletter: to get a better idea of ​​what’s going on.

This year’s disruptions have revealed big data gaps on who does what, where and when, and how it is transported, he writes.

UK logistics company Unipart, for example, is building a machine learning product to try and create more agile supply chains. “You can start teaching the system to use data on container usage and location, port congestion, vehicle movements, driver shortages and raw materials,” says boss John Neill. “This gives you a lot more information to manage and plan delivery times than ever before. ”

The only catch, says Alan, is that some data – such as the routes of Chinese ships – becomes more difficult, rather than easier, to trace. (You can subscribe to the excellent Trade Secrets newsletter here.)

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Good to know: the economy

It’s a big week for central banks and global monetary policy. G7 finance ministers gathered today as Britain’s one-year Presidency draws to a close; the US Federal Reserve meets tomorrow and Wednesday to discuss its asset purchase program and release new economic and interest rate projections; the European Central Bank is expected to announce a decision on its stimulus package on Thursday – the same day as the bank of englandof the decision on interest rates.

Not covered Author Rob Armstrong wonders if the markets are right to remain so bullish about the looming Fed rate hikes. Spoiler alert: he’s still brooding. Meanwhile, consumer spending in debit and credit card in the United States surged last month, even as Americans voiced concerns about the state of the economy.

Latest for UK and Europe

European gas futures jumped 10% this morning after Germany’s new Foreign Minister Annalena Baerbock said the Nord Stream 2 pipeline, which would double the capacity of the existing route between Russia and Europe, was out of line to EU law.

TurkeyThe monetary policy drama intensified as the country’s currency hit a new low, breaking the $ 14 threshold to the dollar, with another interest rate cut expected on Thursday.

World’s last

Rising oil prices and the end of pandemic restrictions have led Saudi Arabia forecast a budget surplus of $ 24 billion a year, its first since oil prices fell in 2014. The economy is expected to grow 7.4% after expanding 2.9% this year.

Investors don’t have a crystal ball. But they have the yield curve. And right now in the United States, he’s behaving strangely. “Normally you don’t see that kind of flattening this early in the rally,” says one bond manager. If you want to know what this suggests for the future of the US economy and understand what the yield curve really is, read this new explainer. You can even create music using the interactive tool.

Japanese company – at least before Omicron’s arrival – is in a confident mood, according to the Bank of Japan’s quarterly Tankan survey. Sentiment among manufacturers is flat but has jumped in the service sector since the lifting of the Covid-19 state of emergency at the end of September.

Namely: company

Sir Richard Branson’s Virgin group donated Virgin atlantic a £ 400million cash injection as fears of new coronaviruses rocked confidence in the travel industry. Virgo and others British airlines called for the removal of “disproportionate” passenger testing rules and demanded a new package of government support to prevent “permanent scars” from the industry. Flight and hotel reservations around the world have taken a serious hit since the arrival of the Omicron variant.

Europe Ski stations had hoped this winter would banish memories of Covid’s spring 2020 “superspreader” events, but many fear the season may be chipped away by Omicron. Skiing is responsible for around half of Switzerland’s tourism revenue, or 2.5 percent of GDP. In Austria, it is worth up to 4 percent.

Chain of ads JD Wetherspoon has warned of damage from a “stealth lockdown” after Westminster last week reintroduced some restrictions in an attempt to stop the spread of Omicron.

The world of work

Almost two-thirds of American companies are now considering making vaccines mandatory for their workers. In Europe, where vaccination rates are higher and mandates focus on individuals rather than companies, the numbers are lower. President Joe Biden’s plan to vaccinate all U.S. companies with 100 or more employees, or to undergo weekly testing, is currently blocked in court, but it still has an influence on company policies, according to research by the Manpower group. .

The algorithms used by odd-job economy companies to deploy, monitor and discipline their staff are being questioned by frustrated workers across Europe, writes technical correspondent Madhumita Murgia. An Uber driver commented: “The lower classes, the concert workers, the self-employed, we are the first to be affected because we are the most vulnerable. But what’s next? What if the AI ​​decided whether an ambulance is dispatched to your home or not, would you feel safe without speaking to a human operator? It affects all of our lives.

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And finally . . .

It turns out that even the North Pole is not immune to labor shortages. The FT’s Lex column examines the growing demand for Santas.