Messy

Supply chains are a mess. A real mess. Go on to the strangely absorbing website www.marinetraffic.com and it all becomes very visual. Panama, Suez, Mallaca, Hormuz, all the big name areas of shipping glow up, and whilst this may not be that unusual, shipping analysts tell an expensive tale of empty ships, bottlenecks, not enough containers and sea captains chewing on Fisherman’s Friends in all the wrong places. The CEO of Sherwin Williams, one John G. Morikis, was the latest po-faced executive to warn on the linen staying creased for some time. He said on a recent call that, “…persistent and industry-wide raw material availability issues have not improved as anticipated, impacting our ability to fully meet the strong demand…”. As analysts took a sharp intake of breath, he continued: “We are now expecting raw material availability, including the unfavorable impact of Hurricane Ida, to negatively impact our third quarter consolidated sales by a high-single digit percentage”. Cue silence, followed by some mild static on the line. This creates all sorts of problems. Take aluminium. There is lots of aluminium to go around. The problem is that it’s all sitting, piled up in some warehouse because there are not enough containers. Hence aluminium prices are going through the roof. Some political fireworks in Guinea, a country that somehow supplies almost a quarter of the world’s bauxite, is also fanning the flames. Coups, though, do that. And the mess appears likely to continue for some time and, in the eyes of none other than UPS, is going to inflict lasting damage on globalisation. Hence the likes of big-ticket commentators such as Mohamed El-Erian becoming concerned about the stirring of ‘stagflationary winds.’ Consumer confidence is also now falling, with ADP the latest to warn of the softening of recent trends and, as a result, the Federal Reserve’s taper timeline has got a whole lot more spicy. In coming weeks, as companies report back on Q3, the outlook for 2022 may well be flavoured by the paring back of expectations. Not because of lower demand but simply because companies can’t get the parts they want. Investors be warned.