The disruption of the coronavirus in the global economy has been felt by everyone. However, one area that seems to be biting on the heels of most consumers is the collapse of supply chains in China.
China as you know by now was the epicenter of the COVID-19 pandemic. As cases soared there, the government in Beijing took drastic lockdown measures, something that led to the closure of factories and a massive halt in manufacturing activities.
And since China is considered the world’s factory, understandably the supply of consumer goods over the last 12 months has become a bit difficult, especially in American markets. As a result, many consumers are now staring down the barrel of the increased price of goods. In the 12 months since the COVID-19 pandemic hit, the cost of shipping a container of goods has grown by three times.
Since early November, this cost has increased by 80%. This sharp increase in shipping costs also comes during a time where consumers are more open to spending money on consumer goods.
For example, due to the lockdowns initiated by local authorities in the US, a lot of people have had to eat and work from home. As a result, they have managed to save money and are redirecting that disposable income towards purchasing imported clothes, furniture, computers, and other electronics.
This increased demand has put unprecedented pressure on Chinese factories to up the ante and deliver as they have always done. But because of the slowed manufacturing in China, this has not been possible. As a result, consumers have been met by the increased price of goods, bottlenecks in shipping, and overall a struggling global supply chain that is at the risk of total collapse.
Additionally, it’s not just about shipping. We are seeing now that even in the US, the movement of goods from ports to retails centers across the country remains a challenge as COVID-19 lockdowns bite. For instance, just last week, 42 ships had docketed at the Port of Los Angeles and yet they had to remain anchored offshore since all warehouses within 60 miles of the port were already full.
This tells you that it's not just getting the goods to the US that is problematic. Even moving those goods from ports to stores and the consumers is proving a big challenge. Many experts feel that this global supply chain problem will get worse over the coming months before it gets better.
It’s estimated that more than one-third of all containers transiting 20 of the largest ports in the world last month didn’t ship in time. This delay means that the global supply chain, an efficient system of global commerce, has now become inefficient as a result of bottlenecks occasioned by the pandemic.
In the short term, we expect two main things to happen. First, there’s surely going to be a shortage of consumer goods in major markets like the US and the EU. We also think that the cost of goods over the coming months will rise sharply as well.