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Supply
Chain by the Numbers |
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- Sept. 30, 2022
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Chinese Belt and Road Initiative Facing Problems; FedEx with Big Jump in Rates; Advice from Drewry on 2023 Container Shipping Negotiations; Apple moving Production to India |
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$1 Trillion |
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That’s about how much China has spent on its Belt and Road program, looking to expand its influence across Asia, Africa and Latin America through co-investment largely in logistics infrastructure projects – and loans to build them. Not long ago viewed as a real threat to Western interests, the Wall Street Journal reported this week that the program is troubled, with China looking at how to overhaul the initiative. A slowing global economy, combined with rising interest rates and higher inflation, have left countries struggling to repay their debts to China. Tens of billions of dollars of loans have gone sour, and numerous development projects are stalled. China is said to be sketching out Belt and Road 2.0, in which it would more rigorously evaluate new projects for financing. Chinese President Xi Jinping once called the initiative “a project of the century.” |
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| That is the general rate increase from FedEx starting in January – it’s highest one year increase in its history, the company announced last week. FedEx and rival UPS raised shipping rates by an average of 5.9% for 2022, the first time in eight years that either had increased prices more than 4.9%. The big jump in rates comes right after FedEx slashed its profit and sales forecasts for the next year, and of course in the midst of still soaring inflation. The average number of packages FedEx handled daily in the quarter ended Aug. 31 decreased 11% from the prior year, the third straight quarter of decline in the metric. A drop in ecommerce volumes is contributing to its shaky finances. UPS has not yet announced its rate hike for next year. |
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5% |
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| That’s how much of its production of the iPhone 14 tha Apple will move to India by late this year, according to JPMorgan analysts this week. That may not sound like much, but it is actually a big step for Apple, versus its almost complete reliance on manufacturing in China. The company has been manufacturing iPhones in India since 2017 but these were usually older models. With the iPhone 14, Apple is producing its latest model in India for the first time, close to the device’s launch. Apple’s focus on manufacturing in India highlights the tech giant’s desire to diversify production away from China and boost customers in India. But it will still be contract manufacturing giant Foxconn manufacturing the devices at its Sriperumbudur factory on the outskirts of Chennai. Apple could also make 25% of all iPhones by 2025 in India, JPMorgan added. |
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That’s how many large global ocean container carriers are left after all the mergers and acquisitions in the sector, the maritime analysts at Drewry reminded shippers in their latest executive brief released last week. Why is that important? Because most medium and larger shippers will need to work with at least five to support their supply chains – meaning shippers should resist the temptation to “seek revenge” by ending relationships with carriers that have “treated them badly” over the last two years in terms of soaring rates and lousy service, as 2023 contract negotiations kick off. However, Drewry is also advising shippers to take a tough stance in terms of new rate agreements and on terms and conditions of the contracts, in what has suddenly become a buyer’s market. Even with tumbling current rates, Drewry recommends shippers do not rush into signing new contracts, noting that “the later you go to bid, the lower the contract rates are expected to be.”
