A stunning backlog of ships and stacks of shipping containers at major ports aren't something investors can ignore. But they should think twice before...
A stunning backlog of ships and stacks of shipping containers at major ports aren’t something investors can ignore, but they should think twice before assuming widespread bottlenecks represent a classic supply shock.
That’s an important distinction. A negative supply shock — an unexpected fall in the availability of a product or commodity — can be unnerving for investors who are more used to dealing with the occasional threat of negative demand shocks — an unexpected hit to demand for goods and services. Problems aren’t confined to the ship backlog at ports. A shortage of truck drivers and available chassis means that containers are stacking up, making it difficult to get goods to their destination once they’re finally on dry land.
It should be no surprise that supply bottlenecks are already emerging as a theme on corporate earnings calls as third-quarter results begin to trickle in. “I think that’s going to have a read-through to earnings across the board, but really just pick your sector,” Donnelly said. The firm’s “time of turnaround” bespoke metric quantifies whether the time it takes to discharge a container is increasing or decreasing, said analyst Michael Tran, in a phone interview. At the ports of Los Angeles and Long Beach, the two largest in the Western Hemisphere, the time of turnaround is now 6.4 days, nearly double the pre-pandemic average of 3.6 days.
A slowdown in demand is almost assured, said Nuveen’s Nick. The U.S. economy has already started to lose momentum after hitting peak growth as a result of stimulus efforts and pent-up demand earlier this year.
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