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    Blog Image

    Transportation Costs Are Coming Down Again, Shows Latest Supply Chain Data

    • Impact of Suez Canal and Panama Canal disruptions appears to be waning, according to GEP Supply Chain Volatility Index data from March 2024

    April 26, 2024 | Supply Chain Strategy   2 minutes read

    Global transportation costs have slipped to their lowest level since December 2023 as the diminishing impact of the Suez Canal disruption brought down container rates.

    Data from the GEP Global Supply Chain Volatility Index for March 2024 showed no discernable impact to the world’s supplies from either the Red Sea attacks or from reduced capacity on the Panama Canal or even the Baltimore port closure, as businesses adjusted to longer delivery schedules.

    Transportation costs had started to come down from February after peaking at the start of the year amid Houthi rebel attacks on commercial ships in the Red Sea.

    Reduced Cost Pressures

    GEP’s global transportation costs indicator fell to 0.02 in February and to 0.01 in March from a high of 0.04 recorded in January. The indicator is among the several used to calculate the GEP Global Supply Chain Volatility Index.

    In fact, logistics costs in February were only marginally higher than their long-term average the previous month.

    Except for a minor uptick in August, the transportation cost indicator was negative (indicating low transportation costs) territory from March to December 2023.

    transport-cost

    Then, in January 2024, global transportation costs jumped to a 15-month high, signaling some contagion from the disruption to shipping through the Suez Canal.

    However, from February, the cost pressure began to cool off across geographies.

    The last time the indicator was at 0.02 was in December 2022.

    The inflection point came at the start of 2024, when the indicator jumped from negative territory (-0.03 in December 2023) to positive territory (.03 in January) in a flash as shippers started avoiding the Suez Canal and rerouted traffic via the longer Cape of Good Hope.

    Some Other Trends

    • Demand for raw materials, commodities and components is nearing closer to its long-term average.
    • Asian factories, mostly in India and China, are leading global manufacturing recovery by purchasing of inputs at the strongest pace since December 2021.
    • There is a sharp reversal in inventories, partly reflecting the winding down of surpluses built up because of the Red Sea crisis.
    • More evidence of staffing capacity constraints, particularly in Europe and North America, amid rising manufacturing backlogs.

    About the Index

    The GEP Global Supply Chain Volatility Index is produced by S&P Global and GEP. It is derived from S&P Global’s PMI® surveys, sent to companies in over 40 countries, totaling around 27,000 companies. The headline figure is a weighted sum of six sub-indices derived from PMI data, PMI Comments Trackers and PMI Commodity Price & Supply Indicators compiled by S&P Global.

    The next release of the GEP Global Supply Chain Volatility Index will be 8 a.m. ET, May 13, 2024.

    For more insights and to request the full report, go to www.gep.com/volatility

     

    Tags: supply chain , Procurement

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