Supply chain disruptions may ease in the second half of 2022, insurer says

• Global supply chain disruptions may continue until the second half of next year, trade credit insurer Euler Hermes said in a report published on December 9. Measures to contain Covid-19 can and have affected manufacturing and shipping operations, exacerbating the supply chain crisis. 
• Production shortfalls are behind 75% of the current contraction in global trade volume, while logistic bottlenecks are the cause of the remaining 25%, Euler Hermes economists wrote. 
• But this supply chain chaos is likely to ease in the second half of 2022 for three reasons. Firstly, consumer demand has peaked, and they are likely to continue buying goods at higher levels. Secondly, inventories are back to pre-Covid levels; after falling off in early 2020, manufacturers rushed to restock to cope with the unprecedented rebound in demand. Lastly, shipping congestion should also be less acute in the second half of 2022 because shipping capacity is increasing. 
• However, there are risks. The cost of shipping may remain elevated next year, but capacity is set to increase as global orders for new container ships hit record highs, amounting to 6.4% of the existing fleet. Furthermore, analysts have previously warned that the new variant, omicron, could deal another blow to supply chains.

(Source: CNBC)