Surging COVID-19 cases involving the highly transmissible Delta variant are putting stress on the already stretched global supply chain. China’s draconian measures to fight against the outbreak meant even a small number of cases might lead to significant trade disruptions. This month, a terminal in the Ningbo-Zhoushan port, the world’s third-busiest container port, was suspended after a single worker tested positive for the disease.
As a result, manufacturers are struggling to import raw materials which upend their production. At the same time, they are also grappling with limited availability of container boxes and soaring freight rates to export their products. Shipping industry participants expect port congestion and lack of available shipping spaces to last until the fourth quarter of the year or perhaps mid-2022.
Economists have warned that higher freight rates and raw material costs could feed into inflation, threatening the world’s fragile recovery from the pandemic. Analysts at Bloomberg’s latest monthly survey of economists expect the personal consumption expenditures price index in the US to increase by 4% in the third quarter and 4.1% in the fourth. That will be well above the US Federal Reserve’s target of 2%.
