Major supply chain disruption: traffic jam in the shipping industry
Macro Insight
QuantCube observes potential supply chain risk using Shipping data
The pandemic triggered a crisis in the global supply chain that continues to threaten economic growth. International shipping trade, which plays a central role in the global supply chains, experienced serious congestion in major ports across the globe in September. Although ships are now starting to move again, supply chain pressures are expected to continue.
By analysing AIS shipping data in real-time, QuantCube tracks ships awaiting at sea or in anchorage for an abnormally long period at the largest ports around the world including Long Beach, Rotterdam, and Shanghai ports.
What does this mean for the supply chain?
Spot freight rates of major East-West trades have been sharply increasing as well for the past four months and reached new records: by mid-October the activity at “Shanghai - Rotterdam” was 550% higher than the previous year, while “Los Angeles – Shanghai” 150% higher. Even though the global ship traffic jam seems to be settling down lately, we can expect upcoming twists as we are approaching occidental end-of-the-year events as well as the lunar new year in China.
Shipping congestion adding tension on the crude oil market
As we can see on QuantCube indexes, this supply chain disruption has been impacting ships differently based on their type; bulk carrier, containers, tankers, LNG carriers, etc. Tankers have been particularly affected, thus limiting imports and exports of crude oil around the world. Crude oil market is already under pressure - its US production is suffering from the consequences of hurricane Ida in the Mexican golf where crude oil extractions are still way below the usual level.
On the demand side, tensions in the gas market boosted crude oil consumption, especially in China. Industries now turned to crude oil to produce electricity because of soaring gas prices. While the demand for crude oil skyrockets, the supply struggles to catch-up and as a result raised oil prices to their highest level in the last three years. Using recently introduced QuantCube Crude Oil Risk Sentiment Index we can observe the tight condition as per Exhibit 4 below. Indeed, investors need to monitor this development continuously to gauge its impact on the global economic growth. QuantCube Crude Oil Risk Sentiment Index successfully anticipated the Crude Oil Prices increase in September 2021 due to rising demand and a supply under constraint. September shipping congestion and the expected congestion around the end of the year could indeed add constraint to the Crude Oil market and contribute to a raise in Crude Oil Prices.
