“Supply chains are almost back to normal in terms of activity, inventories and seasonality. Yet, there are plenty of uncertainties in both the government policy and physical risk heading into the second half of 2023 as firms start to implement long-term supply chain restructuring plans.”, says Chris Rogers, Head of Supply Chain Research at S&P Global Market Intelligence.

Key forecast highlights from the report include:

· In 2023, there appears to have been a return to historic levels in both the level and pattern of shipments during in the first part of the year. For example, in May 2023, US seaborne imports of containerized freight also fell by 27% year over year (y/y) while they were 2% above the 2016-to-2019 average for the month. The S&P Global manufacturing PMI also shows supplier delivery times have reached their fastest since April 2009 as of May.

· As the ongoing conflict in Ukraine is expected to continue through at least the end of 2023, food supply chains are particularly exposed to the “Black Sea grain initiative,” which may only continue from the latter half of July 2023 without Russian participation. Supply chains will likely have little respite from the additional complications brought by sanctions, with new EU regulations covering exports of goods from third-party countries now in-force.

· A review of US Section 301 duties on imports from mainland China, imposed initially by the Trump administration, could be completed by year end 2023. That introduces uncertainty (both positive and negative) for supply chains utilizing the afflicted products. Reshoring decisions may be slowed until the uncertainty is resolved.

· A series of EU-focused environment-linked regulations are being negotiated or come into force during the second half of 2023. These could prove particularly consequential for the steel and aluminium sectors and their downstream supply chains. The implementation of the EU’s Carbon Border Adjustment Mechanism (CBAM) also takes effect in October with a requirement to report imports under the scheme.

· Physical logistics network disruptions from a variety of natural disaster and staff-related factors, such as low water levels in the Panama Canal or cyber-attacks, remain possible, particularly during the peak shipping season.

· As supply chain activities have normalized, corporations are reviewing and implementing supply chain changes in the light of the past three years. The second half of 2023 should bring more announcements of long-term supply chain strategy choices.

Source: S&P Global Market Intelligence