At The Prow

An ASM publication Editorial Director:

Sam Chambers sam@asiashippingmedia.com

Associate Editor:

Adis Adjin adis@asiashippingmedia.com

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Contributors: Nick Berriff, Andrew CraigBennett, Paul French, Chris Garman, Lars Jensen, Jeffrey Landsberg, Dagfinn Lunde, Mike Meade, Peter Sand, Neville Smith, Eytan Uliel

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Lessons learned on the one-year anniversary of the Ever Given grounding

March 23 saw the Splash editorial team ‘celebrate’ for want of a better word the one-year anniversary of the grounding of the Ever Given across the Suez Canal. A lot of water has flowed under the bridge since that momentous day, which saw shipping thrust into the mainstream limelight like never before, providing countless memes and hours of dissection on rolling news channels.

More than 350 ships backed up in a queue behind the Ever Given, and some vessels even took an unusual detour, down around the Cape of Good Hope.

The legal tussle that would ensue once the ship had been freed would run into the hundreds of millions of dollars and the accident would force the Suez Canal Authority to kick off a widening project for the southern portion of the canal.

“Never in the field of global shipping has one ship ever given so much entertainment and laughs. The grounding of the ultra-large container ship made a splash in global news and drew an equally big response online as people rushed to their meme-making apps and cracked open a smile,” wrote Steven Jones from the Propeller Club Liverpool one week on from the grounding last year.

Looking at its significance to global supply chains one year on, the long-term damage to international supply chains from this and following events became apparent in the coming months.

Global news is now very much supply chain news and visa versa. Shipping has had to contend with many other supply chain blockages in the intervening months – not least Covid outbreaks in China and record-breaking queues outside American ports and latterly the fallout from the Russian invasion of Ukraine.

Businesses need to be versatile when it comes to their supply chains and procurement. Modern technology makes agility possible. When a seismic event like this blockage, or a Covid-related port closure or natural disaster, happens, businesses that have visibility across their supply chain can adapt fastest and use data to find alternate solutions and prosper. ●

Sam Chambers Editor Maritime ceo

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On solid ground

Joe Biden is presiding over a decent economy and yet approval ratings remain muted

Arguably President Joe Biden should be in a better place in the opinion polls than he is if economics was the main determinant of ordinary American feelings. But Covid-19 responses, the pull-out from Afghanistan and other issues are weighing on the Democratic White House. Yet the economic numbers look surprisingly healthy. US gross domestic product (GDP) expanded 6.9% on an annualised basis in the fourth quarter, up from 2.3% growth in the third quarter, according to the US Commerce Department.

The employment numbers are not bad either. The United States economy added a robust 467,000 jobs in January, more than expected by analysts. Of course, more people working and higher wage demands may mean some inflation but it seems the US will avoid the higher levels of inflationary pressure seen in, for instance, the European Union. Despite this comparison US consumers still see more inflation and rising living costs than they are traditionally used to - food, gasoline, and rent are all up. However, it seems possible that so too is consumer sentiment. US retail sales rose 3.8% in January from the prior month at the end of 2021, according to the Commerce Department in Washington DC. This rebound followed a sharp decline in December 2021 as fears over the omicron variant slowed sales and dampened sentiment. This is important because of course consumer spending accounts for the bulk of economic activity in the United States. However, the Federal Reserve is expected to raise interest rates later in the year, perhaps several times, and rising borrowing costs could also dampen spending by consumers and businesses.

Exporters may also be bullish in America at the moment, at least in some key sectors. In January 2022, for the first time ever, US exports of liquefied natural gas to Europe exceeded Russia’s pipeline deliveries. Russian exports, which normally account for about 30% of Europe’s gas use, dropped substantially initially because of Russian pricing and latterly because of the Ukraine invasion. And with European gas prices about four times as high as normal, US exports have surged to fill the gap.

According to the Department of Commerce in 2021, exports of goods and services from the US hit $2,528.5bn, up $394.1bn after decreasing nearly $400bn in 2020. Imports increased $576.5bn to $3,387.7bn. In percentage terms exports of goods and services rose over 18.5% in 2021, largely making up for the pandemic-induced 15.6% decrease in 2020.

Much of America’s export rebound was, however, regional with the biggest growths being to Canada to the north and Mexico to the south. Though, as a single market, the EU remained America’s top trading partner with Germany the major destination after the UK (a situation remaining in place after Brexit). ●

American jobs by sector, 2021

Sector

Food, Drinking and Eating Establishments Food & drink retail sales

Farming Food, beverage & tobacco manufacturing Forestry, Fishing and Related

Source: USDA % of US employment

5.5 3.3 2.6 2.0 0.9

The fallout from Ukraine

Europe has acted fast in the days following Russia’s invasion. The effect on the continent’s economy is likely to blunt growth

The Russian invasion of Ukraine is having adverse effects on the European Union (EU), particularly Germany. Inflation, already jumping, will soar further as the continent pays higher energy bills, weaning itself off Russian energy.

Still, as the worst of the Covid-19 pandemic appears to be receding in western Europe the EU is cautiously optimistic about renewed economic growth as the continent emerges into a new normal status post-Covid-19. The European Commission’s Winter 2022 Economic Forecast issued in early February projects that, following a notable expansion by 5.3% in 2021, the EU economy will grow by 4% in 2022 and 2.8% in 2023. Growth in the Eurozone is also expected at 4% in 2022, moderating to 2.7% in 2023. The EU as a whole reached its pre-pandemic level of GDP in the third quarter of 2021 and all member states are projected to have passed this milestone by the end of 2022.

A major issue, which the commission accepts, will be inflation, particularly fuel inflation. Again, according to the commission’s projections, overall inflation in the Eurozone is forecast to increase from 2.6% in 2021 to 3.5% in 2022, before declining to 1.7% in 2023.

It is also worth noting that we are now seeing a clearer picture of the drastic effects on trade between the post-Brexit UK and the remaining EU bloc. UK exports of goods to the EU fell by £20bn ($23bn) over the first year of Brexit, according to the Office for National Statistics (ONS). Also, according to the ONS, UK goods imported from the EU were down almost 17%, or about £45bn, compared with 2018. In comparison, imports from the rest of the world increased by almost 13%, or about £28bn.

The situation in Ukraine aside, how have the major EU economies been performing? It seems France is actually recovering faster than Germany – France’s economy recovered by 0.7% at the end of 2021 while Germany stumbled by 0.7%./ Sweden and Spain also saw some recovery. The International Monetary Fund (IMF), in its latest economic forecast, said France would expand by 3.5% by the end of 2022, with 3.8% growth in Germany and Italy.

Politically it should be noted that while Germany has now gone through its political transition from Angela Merkel of the Christian Democratic Party to Olaf Scholz of the Social Democratic Party, France is facing a presidential election this year with incumbent Emmanuel Macron aiming to win re-election in April. Macron’s finance minister, Bruno Le Maire, has talked of a “re-industrialisation” of France with an emphasis on renewed manufacturing and greater levels of investment – Renault e-vehicles, everyday technology brands, etc. Certainly, France’s apparently strong post-Covid bounce back should play in Macron’s favour though French unemployment remains higher than US, German or UK levels while government debt is high. This spring the French people will decide what direction they wish to go in economically. ●

EU: New jobs starts by top 5 sectors, 2021

Sector % of over all employment Accommodation & Food Service 12 Art, Entertainment, Recreation 7 Administrative & Support Services 6 Agriculture, forestry & fishing 6 Construction 6

Other 63

Total

Source: European Commission 100