The End of China's Covid-Zero for Now
China has been rapidly refashioning its Zero-Covid policy, ending its severe mass testing, quarantine, and lock-down strategies, at least for now. The Lunar New year starts on January 22, 2023. If omicron infection rates start spiking right before then, China will have a big problem on its hands. It is in the process of lifting many travel restrictions but having over 100 million people traveling at the height of a pandemic will not be a pretty scene. Freight booking cancellations are increasing at the ports of Shanghai and Shenzhen as "factories cannot operate properly due to many workers getting Covid." Even with U.S. manufacturing orders from China already down 40% due to an unrelenting demand collapse. The same warning was also highlighted for the Port of Shenzhen, the world's fourth-largest container port and the city home to Apple manufacturers.
Dunavant’s Solution: We are in constant communication with Dunavant Asia to monitor the covid situation planning around any situation that may arise.
Labor Disruptions at World's Ports Quadruple
Labor unrest took a hefty toll on ports worldwide last year, and the outlook for continued economic instability could bring even more upheaval to global supply chains in 2023. At least 38 protests or strikes were affecting port operations last year, more than four times as many as in 2021 when the pandemic upended global trade. In addition, workers feel the impact of higher fuel and food prices in the wake of Russia's invasion of Ukraine while their wages have remained stagnant, said union experts, freight forwarders, and shippers. That's emboldening employees to demand more from their bosses. "Labor unrest is unlikely to decrease going into 2023 and may worsen in the likely event that global economic conditions do not improve," a spokesman for Crisis24 said.
Transportation prices fell at the fastest-ever pace in December
The Logistics Managers' Index (LMI), a monthly survey of supply chain executives, displayed a 36.9 reading for transportation prices during the month. The rate of decline was the fastest recorded in the six-year history of the data set. "With warehouses largely full of product before the start of the holiday season, less transportation than usual was needed to push goods forward at the last minute," the report said. "Waning demand" and, to a lesser degree, lower diesel prices were cited as reasons transportation rates continued to fall. The most recent weekly update shows diesel prices were down $1.27 per gallon from the June high. However, the per-gallon cost was still 30% higher year over year (y/y) on average during December. While prices are falling, the report noted that "Prices will remain high until adequate capacity comes online — specifically in areas near ports and near consumers where it has been desperately needed." It also noted a lag effect from long-term contracts, which will keep the subindex elevated even as new warehouses come online.
Dunavant Solution: As we watch prices come down Dunavant is constantly repricing to pass on these changes. Please visit our website for transportation quotes.
FTC Proposes Banning Noncompete Clauses
The Federal Trade Commission on Thursday issued a plan to ban non-compete clauses. This proposal would allow workers to take jobs with rival companies or start competing businesses but raises the prospect of legal opposition from companies that say the practice has a legitimate purpose. If the FTC eventually votes to adopt the proposal, companies would have to rescind the non-compete requirements they impose on workers and let employees know about the change. FTC officials say non-competes suppress wages, restrain new business formation, and hurt the ability of companies to hire workers they need to grow. The four-member commission voted 3-1 last month to issue the proposal, which is subject to a 60-day period of public comment before it can be adopted as a regulation.
U.S.—Mexico Trade Growth to Remain Steady in 2023
For the first 10 months of the year, cross-border commerce between the U.S. and Mexico totaled $656 billion, according to the latest U.S. Census Bureau figures. That's a decline of less than 1% year over year compared to the same period in 2021 when pandemic-related consumer spending produced record-breaking cross-border freight flows. As the new year approaches, cross-border operators and logistics professionals said, 2023 cross-border freight should remain strong throughout the year, held up by reshoring and nearshoring of manufacturing operations to North America, mainly Mexico. Nearshoring will generate about $30 billion in foreign direct investment in Mexico by the end of 2022, Sergio Arguelles, president of the Mexican Association of Private Industrial Parks. In November, Mexican Economy Minister Raquel Buenrostro said more than 400 foreign companies — mainly from Asia — are currently interested in relocating to Mexico.
Dunavant Solution: Dunavant Cross-Border is positioned at ever entry point as well as intra Mexico. Dunavant can provide tailored solutions for your supply chain enter, exiting, or within Mexico.