Omicron variant hits global supply chain

22 Dec 2021 CW Team

The Omicron variant can cause logistic disruptions at the peak season at the end of 2021 as it slowed down major ports and the global supply chain, with shipping and air freight rates at their highest.

The Shanghai Containerized Freight Index (SCFI) increased by 125.09 points to 4,727.06 points last week, the highest even since October 2009. It has increased to over triple from October last year from 1,438.2 points.

The SCFI lowered to 4,535.92 points in the four consecutive weeks and hit the highest, 4,647.60 points on 8 October. The freight rates to the West Americans, major import routes, including Korea, have increased by $289 to $7,019.

As per the Korea Ocean Business Corporation, 80 ships are waiting for unloading near LA and Long Beach Ports, on the west coast of North America. This congestion continued due to the lockdown of the Suez Canal and worsened due to the Omicron variant.

As per the TAC Index, the average freight rates from Hong Kong to North America were $11.54 per kg in November, which is the highest ever. In June, the freight rate increased to $7.89, $7.90 in July, $8.64 in August, $9.74 in September and $9.94 in October.

Export companies are worrying due to increasing freight rates due to the biggest shopping season, including Christmas, it may deteriorate due to increased freight costs and difficulty to get ship spaces and make a profit.

Small and medium-sized companies sign short-term contracts, unlike the bigger companies that sign long-term contracts, the burden of freight costs are increasing. The companies that produce domestically, compared to local producers, are being hit the most.

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