Why the Supply Chain is Breaking Down – Victor Restis
It’s no secret the supply chain is facing a major crisis, and the shipping industry is a key player. Shipping experts like Victor Restis and others say there are some major reasons for the crisis.
1) An Aging Fleet
An analysis of the shipping industry’s problems shows that one of its main issues is an aging fleet, which makes up about 60-70% of the world’s maritime transport ships. “Aged” means these vessels are 20 years old or more, and ship owners have been trying to get rid of them for some time.
2) Abandoned Vessels and Old Ports
Many ships and ports were abandoned because of the crisis. According to Restis, there are about 300 million deadweight tons (DWT) in old, abandoned vessels. If we take into consideration that only 1million DWT is enough to move one ship per day, then it’s easy to conclude that the industry has a 30-day supply of vessels – an extremely low number compared to historical standards.
3) A War Against Shipping Values
The value of shipping rates has been reduced by 45% over the past nine years; this is another issue hampering the shipping industry. It appears that many companies operating in the sector are not ready for the crisis, which manifests that they have no idea about the industry’s problems.
4) Over-regulation and a Global Crisis of Confidence
Many shipping businesses have been going through a global crisis of confidence, while over-regulation is also to blame for bringing down the sector. Experts say there should be dialogue between the regulator and the regulated in order to help fix things – not to add more regulations that will make things even worse.
5) The Supply Chain’s Dependence on Shipping
A significant issue affecting the global supply chain is its dependency on cheap, efficient shipping services. If all major industries depended on air transport instead of sea transport, we would face a huge problem: Many countries simply don’t have enough airports, so it wouldn’t be possible for them to provide enough aircraft. This issue has been the cause of oil crises in the past, and it could become a reason for a global economic recession.
6) Restricted Access to Credit
The shipping industry is also facing a lack of access to credit because banks are not willing to lend them money due to high risks. In fact, according to some experts, this is one of the reasons why the debt crisis in Greece came about – Greek shipowners were having trouble getting loans from European banks because these financial institutions considered their vessels as major collateral.
What Should Be Done?
Well, that depends on the country’s economy and other factors. If we take into consideration that there have been no big changes since 2008, then it might be time for the authorities to take more serious actions.
That’s why experts say the crisis of confidence is not only between the regulator and the regulated; it’s also among different parties, including regulators, shipping companies, and even banks. The financial problems in Greece are also affecting other European countries that have close business ties with Greece, which means that changes in the country could lead to global political instability.