As the cargo sector returns to pre-Covid normalcy after supply chain disruptions, red flags are being raised by economists that global trade is slowing with recession on the horizon for some nations.
MSC over border and project manager Stephen Masters said in an interview this week that the movement of cargo and shipping flows were getting smoother and the erratic movement of cargo amid the national lockdowns had been normalising over the past month or two.
“Obviously we still have issues where we have, on some occasions, had to cancel sailings due to the backlog and vessels being held outside various ports. One can see that currently in the West Coast US Port of Long Beach, where there is a backlog outside the port, which of course then affects the scheduling of the vessels, specifically the container ships,” Masters said.
In the aftermath of Covid, shipping was under increased pressure with regards the scheduling of vessels between major ports and clearing the backlog of cargo that had been amassed at the height of the pandemic.
This was still the case with South Africa’s major trading partner, China, which had closed its borders earlier this year amid another Covid outbreak.
These trade pressures knocked global economies as the cargo disruption led to increased costs.
But Masters explained that shipping rates were now starting to reduce, as the operational challenges and costs were being overcome.
“Infrastructure is normalising now that Covid has passed and a lot of the logistics options are open again. We are certainly seeing the normalisation and return to business as usual, particularly on road. Rail has still got challenges to overcome,” Masters said.
“We are working with all role players in the private sector, the government, trucking companies and rail companies to identify and overcome and discuss all the challenges, then look at solutions in the industry to make sure that Africa can provide the right global logistics solutions to compete in the global markets.”
With regards to investments in the shipping sector, he said the ports were looking to upgrade and investing across the continent.
“We are engaged with the ports and rail authorities to see what we can do to overcome the challenges of the ageing infrastructure by capital investment and the injection of skills, and also an open discussion on how we move cargo, at what volumes, how we forecast, control, manage and move the cargo in and out through the ports,” he said.
However, while shipping flows are normalising, which is a welcome move, there is concern that global trade is drying up.
Director-general Ngozi Okonjo-Iweala, the head of the World Trade Organisation, told Reuters that she expects that global trade forecasts will be revised lower from the current 3% for 2022, citing the ongoing Russia-Ukraine war and related food and energy crises.
And according to S&P Global Market Intelligence, while freight costs have decreased as a result of the easing of supply chain disruptions caused by the pandemic, a large portion of the slowdown in container and vessel demand was caused by slower cargo transportation.
“Much reduced port congestion level, along with weaker cargo arrivals, was one of the major reasons behind the significant decrease in freight rates,” S&P said in a note earlier this month.
Annabel Bishop, the chief economist at Investec, said in a note this week: “Global economic growth has been slowing more rapidly than was expected a few months ago, driven by tightening financial market conditions, rapid increases in costs and ongoing supply constraints globally of goods, along with increasingly negative sentiment.”
She said the recession risk had climbed for some key economies, and that the International Monetary Fund was revising its growth forecasts next month, highlighting in mid-September already that clearly what “we had characterised as a global economic slowdown has only intensified in recent weeks and months”.
“Downside risks continued to dominate the outlook with just a tremendous amount of uncertainty that needs to be taken into account.
“We do expect some countries to face recession in ‘23. It’s too early to say whether that would be a widespread global recession,” Bishop said.
The CEO of Stablecoin platform Stasis, Gregory Klumov, said in a statement this week that the general economic outlook continued to be grim: growth deceleration across the board with central banks tightening financial conditions. He warned that “the fastest slowdown in decades would lead to four quarters of recession”.
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