Maria L.C. Bertram is international trade consultant for Global Insight (www.globalinsight.com), which provides consulting services, data, and forecasts for more than 200 countries and many industries. Global Insight's trade & transportation practice specializes in consulting, data, forecasts, and analysis for global trade and transportation trends.
Since the early days of the industrial revolution, Africa has traded on its wealth of natural resources, exporting raw materials needed to stoke the forges and feed the factories of more developed nations. Despite the spread of industrialization and the dawn of the digital age, that remains the case today. But Africa's fortunes may be looking up. Soaring demand for Africa's raw materials, coupled with rising global commodity prices, have raised its international stature. Today, Africa commands attention not only from its traditional trade partners, like the United States and Europe (see Figure 1), but from fastgrowing Asian economies as well.
A prime example is the shift in demand for African petroleum over the past decade. Historically, Europe has been the largest importer of Africa's crude petroleum, largely because of geographic proximity and former colonial ties. In recent years, the United States has emerged as a big market, becoming the second largest importer of African oil by 2005.
Although Europe and the United States will continue to be the largest importers of African oil, their import volumes are expected to remain fairly flat. But as demand stalls in the West, it will rise in the East. And when it comes to oil, the thirstiest nation of them all will be China.
China's double-digit economic expansion has made it a huge consumer of oil. Currently on track to overtake the United States as the world's largest energy consumer, it's already looking to Africa to fulfill some of its demand for crude. Statistics bear that out. In 1995, China imported less than 2 million tons of crude petroleum from Africa; within a decade, that number increased more than eightfold. By 2010, we expect to see that number quadruple again, to 60 million tons or more. To facilitate that trade, China has been pumping money into Africa's transportation infrastructure.
Mineral wealth a magnet for Chin
At the same time, Africa can expect to see strong demand for its minerals, both from industrialized nations and from growing economies. In 2000, Africa supplied an estimated 158 million tons of dry bulk materials to the world, while importing a little over 102 million tons.
Africa's dry bulk exports are dominated by metal ores, scrap metal, and coal; together they account for 70.9 percent of Africa's dry bulk export tonnage. Combined, these exports are expected to see growth on the order of 1.5 to 2.0 percent between now and 2015.
Historically, Europe has been the chief market for Africa's dry bulk exports, consuming 59 percent of Africa's exports in 2000 and an estimated 63 percent in 2005. Indeed, Africa supplies Europe with one-quarter of its dry bulk imports, including coal, stone, and phosphates.
As in the case of crude oil, however, China promises to alter that equation. Although Europe will continue to be the largest importer of Africa's dry bulk materials, China has become the fastestgrowing importer, with dry bulk imports growing at 5 percent each year through 2015.
Containerized trade still stuck in low gear
Although Africa has never been a major player in the containerized trade arena (it accounts for only about 8 percent of the world market), its volumes continue to show steady, if unspectacular, growth. Africa's exports (measured in twenty-foot equivalent units, or TEUs) grew by roughly 9 percent a year between 1995 and 2005.
Its trade balance remains somewhat lopsided, however. African imports surpassed exports by nearly 1 million TEUs in 2000. And the imbalance is likely to widen. Imports are expected to grow at an average rate of 5.3 percent per year between 2005 and 2015; exports will lag slightly behind, growing at a projected annual rate of 4.1 percent
Although imports in general are expected to see only moderate growth, demand for a few containerized commodities will grow at double-digit rates. For instance, imports of plastic products are expected to grow at 14 percent annually through 2015. Metal products, refrigerated meats, fish and dairy products, and refrigerated fruits and vegetables are also expected to see annual growth in the neighborhood of 11 to 12 percent.
Africa's containerized exports are less diversified, with refrigerated fruits and vegetables, nonagricultural food products, and nonferrous metals representing a combined 44 percent of its exports (as measured in TEUs). Growth rates are generally expected to be moderate but slower than import growth. While foreign investment in Africa's infrastructure has helped drive export growth in raw-material and low-valueadded products, inadequate investment in manufacturing is inhibiting growth for containerized manufactured goods
As with other major commodity groups, Europe represents Africa's largest containerized trading partner, accounting for 42 percent of Africa's imports and 49 percent of its exports (as measured in TEUs). But Europe's relative importance to Africa's container trade is expected to diminish as China elbows its way into the market. If China continues its pattern of investment, it will be consuming 7 percent of Africa's containerized exports (as measured in TEUs) by 2015 and will be supplying 14 percent of Africa's imports. (Projected trends in containerized trade volumes are shown in Figure 2.)
Positioned for growth
Despite concerns about political stability and the health of Africa's workforce, Asian trade and investment in Africa continues to accelerate. According to the president of the Africa Development Bank, China alone is pledging $20 billion in infrastructure and trade financing to Africa over the next three years.
The effects of that investment are already reverberating across the continent. China's foreign direct investment in Africa (currently reported at $1.6 billion) is not only facilitating trade of natural materials but also is helping to develop low-cost manufacturing capabilities, which will contribute to long-term containerized trade growth. Chinese companies have already helped create an estimated 800 operations in Africa—a step that could lessen the region's dependence on natural resources for export growth and diversify its economic base.
Although Africa still has many problems to overcome before it can emerge as a major economic power, demand is not one of them. With Asian nations eager to tap what Africa has to offer, the continent's trade prospects have never looked brighter.
Container imports at U.S. ports are seeing another busy month as retailers and manufacturers hustle to get their orders into the country ahead of a potential labor strike that could stop operations at East Coast and Gulf Coast ports as soon as October 1.
Less than two weeks from now, the existing contract between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance covering East and Gulf Coast ports is set to expire. With negotiations hung up on issues like wages and automation, the ILA has threatened to put its 85,000 members on strike if a new contract is not reached by then, prompting business groups like the National Retail Federation (NRF) to call for both sides to reach an agreement.
But until such an agreement is reached, importers are playing it safe and accelerating their plans. “Import levels are being impacted by concerns about the potential East and Gulf Coast port strike,” Hackett Associates Founder Ben Hackett said in a release. “This has caused some cargo owners to bring forward shipments, bumping up June-through-September imports. In addition, some importers are weighing the decision to bring forward some goods, particularly from China, that could be impacted by rising tariffs following the election.”
The stakes are high, since a potential strike would come at a sensitive time when businesses are already facing other global supply chain disruptions, according to FourKites’ Mike DeAngelis, senior director of international solutions. “We're facing a perfect storm — with the Red Sea disruptions preventing normal access to the Suez Canal and the Panama Canal’s still-reduced capacity, an ILA strike would effectively choke off major arteries of global trade,” DeAngelis said in a statement.
Although West Coast and Canadian ports would see a surge in traffic if the strike occurs, they cannot absorb all the volume from the East and Gulf Coast ports. And the influx of freight there could cause weeks, if not months-long backlogs, even after the strikes end, reshaping shipping patterns well into 2025, DeAngelis said.
With an eye on those consequences, importers are also looking at more creative contingency plans, such as turning to air freight, west coast ports, or intermodal combinations of rail and truck modes, according to less than truckload (LTL) carrier Averitt Express.
“While some importers and exporters have already rerouted shipments to West Coast ports or delayed shipping altogether, there are still significant volumes of cargo en route to the East and Gulf Coast ports that cannot be rerouted. Unfortunately, once cargo is on a vessel, it becomes virtually impossible to change its destination, leaving shippers with limited options for those shipments,” Averitt said in a release.
However, one silver lining for coping with a potential strike is that prevailing global supply chain turbulence has already prompted many U.S. companies to stock up for bad weather, said Christian Roeloffs, co-founder and CEO of Container xChange.
"While the threat of strikes looms large, it’s important to note that U.S. inventories are currently strong due to the pulling forward of orders earlier this year to avoid existing disruptions. This stockpile will act as an essential buffer, mitigating the risk of container rates spiking dramatically due to the strikes,” Roeloffs said.
In addition, forecasts for a fairly modest winter peak shopping season could take the edge off the impact of a strike. “With no significant signs of peak season demand strengthening, these strikes might not have as intense an impact as historically seen. However, the overall impact will largely depend on the duration of the strikes, with prolonged disruptions having the potential to intensify the implications for supply chains, leading to more pronounced bottlenecks and greater challenges in container availability, " he said.
A coalition of freight transport and cargo handling organizations is calling on countries to honor their existing resolutions to report the results of national container inspection programs, and for the International Maritime Organization (IMO) to publish those results.
Those two steps would help improve safety in the carriage of goods by sea, according to the Cargo Integrity Group (CIG), which is a is a partnership of industry associations seeking to raise awareness and greater uptake of the IMO/ILO/UNECE Code of Practice for Packing of Cargo Transport Units (2014) – often referred to as CTU Code.
According to the Cargo Integrity Group, member governments of the IMO adopted resolutions more than 20 years ago agreeing to conduct routine inspections of freight containers and the cargoes packed in them. But less than 5% of 167 national administrations covered by the agreement are regularly submitting the results of their inspections to IMO in publicly available form.
The low numbers of reports means that insufficient data is available for IMO or industry to draw reliable conclusions, fundamentally undermining their efforts to improve the safety and sustainability of shipments by sea, CIG said.
Meanwhile, the dangers posed by poorly packed, mis-handled, or mis-declared containerized shipments has been demonstrated again recently in a series of fires and explosions aboard container ships. Whilst the precise circumstances of those incidents remain under investigation, the Cargo Integrity Group says it is concerned that measures already in place to help identify possible weaknesses are not being fully implemented and that opportunities for improving compliance standards are being missed.
By the numbers, overall retail sales in August were up 0.1% seasonally adjusted month over month and up 2.1% unadjusted year over year. That compared with increases of 1.1% month over month and 2.9% year over year in July.
August’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.3% seasonally adjusted month over month and up 3.3% unadjusted year over year. Core retail sales were up 3.4% year over year for the first eight months of the year, in line with NRF’s forecast for 2024 retail sales to grow between 2.5% and 3.5% over 2023.
“These numbers show the continued resiliency of the American consumer,” NRF Chief Economist Jack Kleinhenz said in a release. “While sales growth decelerated from last month’s pace, there is little hint of consumer spending unraveling. Households have the underpinnings to spend as recent wage gains have outpaced inflation even though payroll growth saw a slowdown in July and August. Easing inflation is providing added spending capacity to cost-weary shoppers and the interest rate cuts expected to come from the Fed should help create a more positive environment for consumers in the future.”
The U.S., U.K., and Australia will strengthen supply chain resiliency by sharing data and taking joint actions under the terms of a pact signed last week, the three nations said.
The agreement creates a “Supply Chain Resilience Cooperation Group” designed to build resilience in priority supply chains and to enhance the members’ mutual ability to identify and address risks, threats, and disruptions, according to the U.K.’s Department for Business and Trade.
One of the top priorities for the new group is developing an early warning pilot focused on the telecommunications supply chain, which is essential for the three countries’ global, digitized economies, they said. By identifying and monitoring disruption risks to the telecommunications supply chain, this pilot will enhance all three countries’ knowledge of relevant vulnerabilities, criticality, and residual risks. It will also develop procedures for sharing this information and responding cooperatively to disruptions.
According to the U.S. Department of Homeland Security (DHS), the group chose that sector because telecommunications infrastructure is vital to the distribution of public safety information, emergency services, and the day to day lives of many citizens. For example, undersea fiberoptic cables carry over 95% of transoceanic data traffic without which smartphones, financial networks, and communications systems would cease to function reliably.
“The resilience of our critical supply chains is a homeland security and economic security imperative,” Secretary of Homeland Security Alejandro N. Mayorkas said in a release. “Collaboration with international partners allows us to anticipate and mitigate disruptions before they occur. Our new U.S.-U.K.-Australia Supply Chain Resilience Cooperation Group will help ensure that our communities continue to have the essential goods and services they need, when they need them.”
A new survey finds a disconnect in organizations’ approach to maintenance, repair, and operations (MRO), as specialists call for greater focus than executives are providing, according to a report from Verusen, a provider of inventory optimization software.
Nearly three-quarters (71%) of the 250 procurement and operations leaders surveyed think MRO procurement/operations should be treated as a strategic initiative for continuous improvement and a potential innovation source. However, just over half (58%) of respondents note that MRO procurement/operations are treated as strategic organizational initiatives.
That result comes from “Future Strategies for MRO Inventory Optimization,” a survey produced by Atlanta-based Verusen along with WBR Insights and ProcureCon MRO.
Balancing MRO working capital and risk has become increasingly important as large asset-intensive industries such as oil and gas, mining, energy and utilities, resources, and heavy manufacturing seek solutions to optimize their MRO inventories, spend, and risk with deeper intelligence. Roughly half of organizations need to take a risk-based approach, as the survey found that 46% of organizations do not include asset criticality (spare parts deemed the most critical to continuous operations) in their materials planning process.
“Rather than merely seeing the MRO function as a necessary project or cost, businesses now see it as a mission-critical deliverable, and companies are more apt to explore new methods and technologies, including AI, to enhance this capability and drive innovation,” Scott Matthews, CEO of Verusen, said in a release. “This is because improving MRO, while addressing asset criticality, delivers tangible results by removing risk and expense from procurement initiatives.”
Survey respondents expressed specific challenges with product data inconsistencies and inaccuracies from different systems and sources. A lack of standardized data formats and incomplete information hampers efficient inventory management. The problem is further compounded by the complexity of integrating legacy systems with modern data management, leading to fragmented/siloed data. Centralizing inventory management and optimizing procurement without standardized product data is especially challenging.
In fact, only 39% of survey respondents report full data uniformity across all materials, and many respondents do not regularly review asset criticality, which adds to the challenges.