Market Update – 17th February 2023

Turkey has often been suggested an as manufacturing alternative to Asia, especially for textiles. Hugo Boss, H&M and Levi Strauss are just three examples who have relocated production to the region to shorten supply routes. And all three are likely to have experienced significant disruption in the wake of the recent earthquake. 

Not only has the loss of life been catastrophic, but local supply chains have been left in ruin. This week the death toll surpassed 40,000, and economic cost is estimated to shave off around 1% of GDP.  

With regards to the infrastructural damage, it should come as no surprise. Turkey has skilled labour, good trading relationships with raw-material exports and is in close proximity to western markets. 500 apparel facilities operate here, and now there are hundreds of textile plants halting operations for up to six months. 

There’s also major damage to the ports that help facilitate the seaborne trade and steelmaking industry in the country. Experts say it could take years to normalise trade flows through Iskenderun port, which impacts fertilizers, corn, polyester fibres, iron and other products. 

As we’ve said before in relation to global disasters, events like this highlight the volatility of the world’s supply chains. It’s time to invest in protective measures and alternatives or continue to experience long-lasting disruption after environmental tragedies. 

In other news:    

Transportation trends       

Land:      

• Both the courier and haulage vehicle price-per-mile fell in January, following an all-time high in December. The overall index fell by 9% to 118.7, following the trend seen every January for the last four years, where prices peak in December and settle in the New Year.
   
• The deteriorating traffic situation across the road transport industry is set to be addressed by digitising queue procedures at border crossings.
   
• The IRU is concerned about the announced changes to the UK government’s Clandestine Entrant Civil Penalty Scheme for road hauliers, and the potential impact it could have on UK-Europe supply chains. Measures to prevent illegal migration already cost haulage firms over £1 billion every year.
• This week the Irish Government approved a Scheme design, and funding of €18 million for the Licensed Haulage Support Scheme 2023 to assist licensed haulage businesses with cost pressures. 

Air:   

• The Indian government has given the go-ahead for Bangladesh’s transhipment cargo to be handled at the Delhi Air Cargo facility in an effort to further regional trade centre ambitions.  

• Airport Authority Hong Kong (AAHK) has signed a cooperation framework agreement with Dongguan Municipal People’s Government to further develop intermodal operations. The agreement covers various areas on which the Dongguan Government and AAHK will work together to enhance air cargo services in the Greater Bay Area and to implement customs clearance facilitation initiatives.
   
• The US air cargo sector highlighted some of the concerns it has regarding the implementation of stricter cargo screening rules due to be enforced later this year. From November all cargo must be screened before it is loaded onto a freighter but a panel at US Airforwader Association’s (AfA) annual meeting urged the Transportation Security Administration (TSA) to work urgently with shippers to address the impact of the new requirements. 

Sea:    

• The pricing battle that has characterised nearly every cycle of this shipping sector over the past 50 years has started in the liner shipping industry.  

• Backhaul trades have experienced considerable drops as a result of the decline in container freight rates from Asia during the previous six months. Competition among ocean carriers for backhaul cargo has increased as a result of the enormous number of empty containers that are building up enormous storage expenses at depots throughout the world.  

• In Australia, Interest rates bite sea freight demand as food growers prepare export plans. 

Industry news      

• According to Ti’s 2023 Agility Emerging Markets Logistics Index, almost one-third of logistics businesses would raise their rates this year as a result of rising energy costs, plummeting demand, and supply chain interruptions. 

• As a significant digital advancement for the industry, nine of the biggest global carriers that are members of the Digital Container Shipping Association (DCSA) have agreed to fully implement an electronic bill of lading (eBL) based on DCSA standards by 2030. 

• Amazon has informed its European vendors that it will now focus on sourcing its
  products directly from brands instead of wholesalers. The retailer has said that it has reviewed available options before choosing this approach which it believes will help to control its costs and ‘keep prices low’ for customers.
   
• In the US, the derailment of a Norfolk Southern train carrying hazardous chemicals in the eastern Ohio village of East Palestine has brought into sharp focus the growing environmental risks embedded in supply chains. The 150-car train derailed on Feb. 3, hauling about 20 railcars with chemicals, including vinyl chloride, ethylhexyl acrylate and isobutylene. 

Looking forward   

After the pandemic we saw businesses diversify their supply chain so that they weren’t wholly concentrated in China. Disasters of this scale highlight that while diversification helps limit the scale of the damage, it doesn’t wholly protect you.

However, this is also a reminder of how organisations that operate in the region can support those affected as the likes of Sun Express, DPD and others have united to bring in supplies. If you would like to donate, the Red Cross are working tirelessly to support those impacted. Their donate page is here.