WTO: Supply Chain Congestion Will Ease Soon
RedStone Resource
February 24, 2022
Inside This Edition
Cyber Attacks Increasing in 2022
Many popular news reports point to the Russia/Ukraine conflict as pushing the risk of cyber attacks higher, and that could very well be the case. But since the beginning of the year, cyber security experts say that ransomware attacks have surged nearly three-fold over previous years in the first two months of 2022.
World Trade Organization Believes Supply Chain Congestion Will Ease Soon
The WTO has predicted that global supply chain bottlenecks and congestion will ease in “the coming months”. The organization believes that an overabundance of demand has been coupled with COVID related impacts to transportation systems.
Oil Markets Remain Volatile Amid Geopolitical Uncertainty
Petroleum prices have been volatile in the past several weeks. As geopolitical tensions in Ukraine add uncertainty surrounding petroleum supplies, prices remain elevated.
ECONOMIC BRIEFING
Producer Prices for Transportation Surge Again Unexpectedly in January
In a period that is normally weaker coming out of the peak holiday retail season, transportation producer prices came in notably higher in January. There are many sources of data that one can reference to illustrate this point, but the Producer Price Index survey conducted by the US Bureau of Labor Statistics has been one of the trusted monthly gauges since the 1920’s. The best part of the survey is that it is possible to get very specific pricing direction for highly specific sectors, transportation being one of them.
The Producer Price Index would include contract, spot, and fuel surcharges when users of transportation services are asked about their experience over the previous month with prices.
The truckload PPI was higher by 1.1% month-over-month and was a shocking 29.7% higher year-over-year. Less-than-truckload prices were 14% higher year-over-year and 3% higher month-over-month. Rail freight transport was 1.6% higher month-over-month and 9% higher year-over-year in January.
Cyber Attacks Increasing in 2022
Many popular news reports point to the Russia/Ukraine conflict as pushing the risk of cyber attacks higher, and that could very well be the case. But since the beginning of the year, cyber security experts say that ransomware attacks have surged nearly three-fold over previous years in the first two months of 2022.
Although not a popular topic to discuss when thinking about supply chain management, it is a critical component in modern supply chains and a sector of the global economy that have become hot targets for cybercrime. Experts have estimated that the US will need nearly 73 zettabytes of data processing storage and power by 2025 to handle of the cloud computing, streaming, 5G, and operational data that is shared between devices (automation and robotics, autonomous vehicle operations, etc.). It takes nearly 1,000 small and medium sized data centers to handle a single zettabyte. The challenges and risk of cyber hacking as the world moves this much data is growing and will continue to be a factor.
TRANSPORTATION BRIEFING
World Trade Organization Believes Supply Chain Congestion Will Ease Soon
The WTO has predicted that global supply chain bottlenecks and congestion will ease in “the coming months”. The organization believes that an overabundance of demand has been coupled with COVID related impacts to transportation systems. The result was the global supply chain disruption and widespread backlogs that we have seen since late 2020.
Countries in Southeast Asia like Vietnam have now pledged that they do not anticipate closing ports or manufacturing facilities again because of new COVID outbreaks, unless it is a particularly dangerous strain of the virus. This is one of the first major global trade partners to make such an announcement, and it could provide some stability for sourcing managers.
Thus far, the easing of congestion has not yet really started across the US. There are still a large number of container ships that still have to be unloaded despite Q1 historically being a fairly mild period for freight movement in the post-holiday period. Companies are still trying to rebuild inventory levels and only now are there pockets of companies that are reporting that they have started to return to a ‘balanced state’ (just-in-time, not just-in-case).
Oil Markets Remain Volatile Amid Geopolitical Uncertainty
Petroleum prices have been volatile in the past several weeks. Prices for West Texas Intermediate have fluctuated between $85 and $95 dollars a barrel and predictions of $100 per barrel oil are frequent. As geopolitical tensions in Ukraine add uncertainty surrounding petroleum supplies, prices remain elevated.
Petroleum investments in production and output are running 25% lower than they were prior to the pandemic. The number of active wells in the United States are hovering at approximately 600, in 2019 prior to the pandemic the country had more than 1,029 active. Global production has been able to fill gaps in supply and demand has been somewhat subdued because of lower commuter traffic volumes (more people working from home during the ongoing pandemic). But the Energy Information Administration still shows that the balance between supply and demand should continue through the end of next year.
Fuel surcharges are 38.9% higher than they were a year ago and are 2.7% higher week over week in the first two weeks of February. Diesel prices are also approaching levels that we haven’t seen since 2014 when the per-barrel price of oil was above $100 per barrel frequently.
