TT Club highlights long-term changes to supply chain risk profiles

The world is suffering from a disappearing ability to absorb short-term shocks to the supply chain because of fundamental societal and geopolitical changes to the global equilibrium,” said Dorota Jilli, Senior Underwriter at TT Club, at the recent Annual Conference of the European Sea Ports Organisation (ESPO) in Valencia. She added that, while Covid-19 and the Ukraine-Russia war were disruptive and were driving up prices, the longer-term trends of production cost increases in Asia and stricter demands of ESG meant that cheaper goods and transport services were “features of a past global economy.”

TT Club said that the erosion of traditional buffer mechanisms to ensure continual supply of goods demanded “a new assessment of potential risks”.

It noted that the challenges inherent in today’s international trade and the supply chains that service it were “painfully obvious – higher prices of energy and food, shortages of and delays in delivering manufactured goods, dynamic changes in markets and sourcing regions”.

The on-going effects of the pandemic, with its associated lockdowns, and the war in Ukraine were proving catalysts to ignite underlying economic and environmental trends that would continue to fuel long-term changes in the pattern of global supply and demand, the Club said.

Jilli noted that abandoned cargo was now more prevalent, with delays through port congestion and lockdown closures meaning the incidence of consignee bankruptcy or goods being unwanted due to loss of markets was higher. This was particularly concerning when dangerous good were left in storage for excessive periods, as the tragic incidents in Beirut last year and in Chittagong more recently attest.

“Trends in cargo theft are also in flux, with more essential goods such as food and beverages being targeted, and luxury goods and electronics not so much as in the past,” commented Jilli, who added that “cargo at rest, either at ports or inland staging areas, some of which have been hurriedly pressed into service as overflow facilities, is increasingly subject to theft. With shippers looking for ‘workarounds’ to reduce costs or avoid congestion, thieves have been quick to adapt their methodologies and the use of online means of deception and insider recruitment are now both more common.”