Global supply chain disruptions impact consumers and economy

Supply chains are under siege as a multitude of events have occurred around the world.

Some of these include a drought in Central America that decreased water levels in the Panama Canal, Houthi rebels attacking ships in the Suez Canal and rail workers in Canada threatening to strike, which could affect ports in Vancouver.

All of these problems are leading to increased costs which could also make the cost of certain goods rise.

Hitendra Chaturvedi, Professor in the Department of Supply Chain Management at ASU, joined “Arizona Horizon” to give the latest updates of supply chain and how this affects the economy.

Currently there are low water levels in the Panama Canal, Chaturvedi explained, that are affecting the normal sailing routes for ships. 

“So what is happening is now you have ships that are going around, adding 4,000 miles,” said Chaturvedi. 

Since the ships are adding an extra 4,000 miles to their route, this is causing the prices and expenses of fuels to rise. 

“The rates about six months ago, before October 7, from Asia to Europe was about $1,200 per 40 foot container. Today they are creeping up to $7,000. From Shanghai to LA, the rates were about $2,000; they are creeping up to $7,000, and to the East Coast, about $8,000,” said Chaturvedi. 

Chaturvedi believes a reason why the costs are significantly increasing is because of greed. 

“A combination of dock workers’ strikes and Houthi rebel strikes and a combination of oligopoly. Three alliances control 95% of the market, and you add greed in there, you have a repeat of COVID,” said Chaturvedi. 

People think after COVID-19, the freight cost decreased because the economy was slowly declining. However it was the opposite, and instead, costs increased. 

“Many people believe that just because the freight cost was going down, because the economy’s slowing down, some of the cost increases could be because of greed,” said Chaturvedi.