Product-to-Market Pathway SUMMARY: Raw material cost are stabilizing, ocean freight charges are moderating, and fuel prices are trending down. These are positive developments on the road to recovery that should continue through Q4 but are being offset by continued port congestion, increased shortages of truck chassis, North America driver shortages, and the threat of labor actions by railroad and dock worker unions.
Factory-to-Port Outbound Logistics
Ocean Transport Inbound to North America
DC-to-Customer Outbound Logistics
Demand for oil and natural gas is surging globally and may lead to increased diesel fuel cost in North America in going into 2023. Extreme shortages of truck chassis is the latest in a string of crisis factors contributing to on-going port backlogs.
Typhoons impacted shipping time and port productivity at Shanghai-Ningbo, the world’s third - largest port, by forcing temporary closure for several days in September.
Covid zero-tolerance policies in China and the nation’s high vulnerability to outbreaks remain points of caution for North American supply importers and consumers.
High demand and constricted supply of
. Energy cost is a top contributor to raw material pricing and energy futures began declining last quarter with crude oil down touching the lowest levels since January, prior to the start of war in Ukraine. Raw material costs are less volatile through the middle of 2022 than compared to Q1, and to all of 2021. Supply and demand balance for most commodity materials should continue to stabilize into 2023.
shipping container space helped big ocean freight companies set record profits, over $256 billion so far in 2022. Limited shipping berths due to increased demand delayed deliveries and increased cost-of-goods, while boosting profits for big shipping firms. Ocean freight rates have begun cycle of receding that will take months to show up in cost-of-goods and is likely to be inhibited by shipping firm capacity manipulation to retain profitability.
New Covid outbreaks such as have happened in September in the city of Chengdu, home to 17 million people, will disrupt factory production and induce shocks to a still fragile global supply chain.
US West Coast dockworkers are
leveraging the threat of labor actions in contract negotiations a similar scenario that roiled the rail industry in September before rail worker unions signed new contracts.
One possible exception is specialty and thermal paper production where availability of raw material input is constrained and now affecting production rates and finished good prices.
Shortages of skilled labor and availability of raw materials, especially paper, are posing a new wave of challenges to North American manufacturers in the back half of 2022.
Q4 2022 Market Update
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