Supply chains go travel-style: All-inclusive logistics present opportunities for Investors
Søren Otto Simonsen
Senior Investment Editor
Summary: Global supply chains are challenged and while it is frustrating not being able to get the iPad or car you want, the development forces the logistics sector to reinvent itself, which presents interesting opportunities for investors.
With container prices soaring and the possibility of getting goods offloaded in harbours decreasing, it is getting increasingly important for companies to get an all-inclusive deal with their logistics partner and be a premium partner who can get their goods prioritised over other’s. According to Saxo’s Head of Equity Strategies, Peter Garnry, the current supply constraints split the logistics sector in two: “With the challenges, we are experiencing, we have seen a bigger move towards what I guess you can call all-inclusive logistics companies, instead of the more traditional line shipping companies, where you just move a piece of good from A to B. Instead, companies need their logistic partner to take their goods all the way from factory to end-destination,” he says.
In the picture below it can be seen that the amount of cargo being off-loaded and loaded in a port like Hong-Kong has fallen roughly 25 pct. on average from 2020 to 2021. This serves as an example of bottlenecks in the global supply chains, which make it harder for goods to go from one place to another and thus delivery takes longer. The picture also shows the massive price increase on shipping containers from 2020 to 2021. This indicates the imbalance between the “supply of logistics” relative to the demand of it. In other words, as a company it’s harder to get your goods in a container and on a containership and therefore get it to where it’s being sold. Therefore, companies are willing to pay more for those containers.
On the other hand, Garnry sees that logistics companies sticking to more traditional business models could be in trouble: “I don't think the simple transport services, simple trucking companies or simple line shipping will be very interesting. I think to a large extent that aligned shipping companies moving containers from A to B is still very much a commodity. It may be a little bit more complicated than producing televisions, but it's still in that category of being a commodity service or commodity driven industry and because of that I don't think their return on capital will be very good,“ he says.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.