January 10, 2023
February 2022
Editorial
February 2022 - This month, supply chain issues persist but with a more catastrophic concern on the horizon - the latter part of this month marks the intense escalation of the Russian/Ukrainian conflict; with Russia invading the former USSR state on the 24th of February. This elicited a global response, with sanctions from the United States, Russia, Japan, and Singapore - just to name a few. This war could lead to the Russian and Ukrainian economies to struggle, and well as rising oil and natural gas costs globally.
In global freight and fulfilment news, Air Asia seeks to include more cargo in its Asian pacific flight routes, Amazon is looking to improve its freight forwarding operations, experts are predicting high shipping costs to remain in place until 2022; and shipping companies made $150 billion last year, and the CEO of CMA CGM group has announced they will no longer be transporting plastic waste. Additionally, warehouse space has been in high demand the past few months - with Warburg Pincus has been purchasing a wide portfolio of warehouses globally and the largest ever warehouse deal has been completed for £233 million. Amazon is being blamed for some of this high warehouse costs because they hold such a significant amount of space.
In manufacturing and sourcing news - the Canadian truckers protest has wreaked havoc on American and Canadian automobile manufacturing industry, with steel, oil and electronic components being stuck at the border. Furthermore, there have been immense developments for electric vehicles battery sourcing as cost for their materials soar; with rare forms of sulfur discovered to increase capacity of batteries and recycled lithium-ion batteries out-perform newly developed ones.
In technological news, China, and the U.S have been named at the forefront of digitalization globally, AI training facilities being launched in Singaporean schools, and AI is being integrated in covid treatment facilities in Singapore. In sales news, Walmart and Home Depot are thriving in sales, while Kellogg’s and Kraft fall short. Additionally, Virgin Galactic has reopened sales of its 90-minute intergalactic joyride at $450,000.
In company and country specific news - Honda is maximising its output despite supply chain challenges, Google is restricting apps from Android devices that track users, Starbucks and Amazon are hiking up its prices, and DHL is expanding its cold storage capabilities for pharmaceuticals. Shell is also offering sustainable aviation fuel at Singapore Changi airport and there has been a subtle shift in China’s covid-zero policy.
Finally, regarding covid issues this month - many countries are easing their restrictive measures - with China approving a Pfizer pill, a sign the nation may be moving away from its covid-zero policy. However, inflation is a concern with all the supply chain constraints and now the confounding factor of war in Ukraine - will only make matters worse.
Global Freight
Air Asia X Targets Air Cargo Revenue with Bellyspace Deal
- Air Asia is striving to boost its air cargo revenue, and work in partnership with global freight forwarders.
- Recently, Air Asia announced a partnership with GEODIS - global logistics leader - to organize several weekly dedicated cargo flights throughout Asia Pacific.
- Amazon is seeking to expand its freight forwarding business - by offering low-cost container shipping services.
- Amazon is currently offering an 8% discount on ocean shipping services for the first 60 days after onboarding.
- Moller-Maersk and DSV - two of the biggest names in global logistics - predicted another bumper year in profits due to persistent backlogs in ports and other bottlenecks. 2022 freight levels are expected to remain in line with 2021.
- Container operators have been the biggest beneficiaries of pandemic related disruptions, the cost of shipping a 40ft container from China to California in September 2021 was $21,000 compared to $1,500 in 2019.
- Ocean shipping rates are expected to remain high going into 2022.
- Large customers of cargo, like Walmart or Ikea have the leverage to organize better terms in shipping deals, but smaller importers and exporters are feeling the pressure; and are being exploited for their desperation.
- Experts suggest, if nothing is done to reverse the upward trajectory of shipping costs; the risk in terms of inflation and food security can grow very high.
- The CEO of CMA CGM Group; Rodolphe Saadé - a French container transportation and shipping company - announced it will no longer transport plastic waste on board its ships, to prevent waste being shipped to destinations where sorting, recycling and recovery cannot be assured.
Global Fulfilment
Warburg Pincus Backed ESR Resumes Buying Spree with China, India, Warehouse Deals
- Hong Kong listed, ESR Cayman, is continuing to expand with the purchase of warehouses in Shanghai and India.
- The Shanghai deals comes on the heels of ESR’s announcement that they are developing the first in-city distribution center in Delhi; supporting, grocery, healthcare and cloud kitchens.
- Arrow Capital Partners has acquired a logistics base at Wakefield Hub from Mountpark Logistics.
- The warehouse contains a robotics warehousing facility developed by Amazon.
- Arrow Capital has a logistic development portfolio worth over £2bn.
- In the United States, retailers and logistics firms are struggling to find commercial warehouses and industrial space - a pandemic fueled issue, due to the rise in online shopping.
- The tight warehouse market has spurred logistic companies to try different strategies for storing and moving goods, e.g., by reducing truckers idle time (drop their goods, take a new container, and leave without waiting for unloading) and creating multistory warehouses.
- Amazon has been scooping up a significant amount of warehouse space, it had a holding of 192 million square feet of warehouse space in 2019, to more than 410 million in early 2022.
- Although, Amazon is not the sole reason for the overwhelming warehouse rental spike - it has created immense competition for the e-commerce market to provide quick turnaround times; to get products to its customer.
- Amazon India is committing to be more environmentally responsible and energy efficient, it acknowledges that commitment and investment into sustainability is a win for all.
- Amazon will reduce packaging waste and utilize electric delivery vehicles - among other actions.
Manufacturing
Manufacturing Association Says Blockades Taking Big Pinch Out of Alberta’s Economy
- The Canadian Manufacturers & Exporters Association is calling for an Immediate end to the trucker blockades at the border.
- Critical supplies like steel, oil, and other electrical components are sitting at the border - taking longer to arrive as delivery drivers try to navigate through the protesters, or simply halted altogether.
- Experts suggest the impact of these blockades is about $600 million over the last two weeks, and an additional $44 million a day.
- Two years of pandemic-induced disruptions have laid bare the risk of globalized supply chains; factory shutdowns, shipping bottlenecks - have disrupted access to essential goods throughout the world.
- There are systemic issues that need to be addressed to revamp the global supply chain and reshape them to be more resilient, e.g. diversify the risk (global factories as opposed to Asia dependent), rebalance the value chain (access to commodity electronic parts globally), robust ecosystem (slower product life cycles), government leadership (create a skilled workforce, invest in industries and adequate infrastructure).
- Thousands of truckers in Canada are protesting about vaccine mandates and have been blocking major border crossings between Canada and the United States.
- Car factories (e.g. Ford, Motor, General Motors, Honda and Toyota) in Ontario and Michigan were shut down for a few days - due to lack of steel, aluminum and other parts that keep these factories running.
- There is no current sign of these blockades ending, and there is currently an estimate of $140 million being stuck at the borders.
- Linker Cloud has raised €3.5m in funding for a fulfillment network, dedicated to e-commerce companies operating throughout Europe.
- The platform will accommodate shipping and automate the order handling process.
- The White House announced a task force to promote the use of greener construction, as the U.S moves towards cutting its overall emissions 65% by 2030.
- Construction is a significant source of carbon dioxide emissions; the production of cement accounted for 7% of global carbon dioxide emissions in 2019.
Procurement & Sourcing
Rare Form of Sulfur Offers a Key To Triple-Capacity EV Batteries
- Lithium-sulfur batteries are potential for more environmentally electric vehicles.
- These batteries do not rely on the same expensive and increasingly scarce material such as cobalt, manganese and nickel.
- The worlds current mining operations cannot extract enough lithium to meet the skyrocketing demand for batteries.
- These mining operations are also counter-intuitive, as the more mines there are, the more environmentally harmful the project becomes - due to the operations depleting local water resources and polluting nearby areas with runoff debris.
- New research shows that a recycling process - that refurbishes the battery cathode - enables these recycled batteries perform just as well as new batteries, and even last longer and charge faster.
- Demand for lithium is outweighing its supply and is making electric vehicle costs almost comparable to the cost of gasoline-powered vehicles.
- The growth in sales of EV has been rapidly increasing due to their relative affordability to gasoline powered cars, but with the many hiccups facing the EV industry this growth may slow.
- Workers at the Kamoto Copper Company (KCC) in the Democratic Republic of Congo’s, are speaking out about their working conditions; clocking in at 7AM and out at 6PM - with little water and food to endure these long hours.
- KCC states they pay all direct employees above the DRC’s minimum wage of $3.50 per day, however, workers state it is nowhere near the living wage ($400 per month) needed to suffice.
- KCC is the largest cobalt producing mine in the world, churning out 20,000 tons of metal used in electric vehicle batteries, phones, and computers.
- Medicago, a Quebec-based company, has developed the first Canadian Covid vaccine - Covifenz, the world’s first plant=based jab authorised for human use.
- It is also the first Canadian vaccine to be approved in over 20 years.
Technology & Automation
ITE Unveils New AI Training Facilities, Industry Partnerships.
- The Institute of Technical Education has launched a new drone and robot hub, and an advanced computing lab for students to learn artificial intelligence skills.
- Singapore fashion label Love, Bonito, is using AI and data to facilitate its expansion in Hong Kong and Japan as it faces strong competition in women’s clothing.
- Love Bonito is tapping into their data of customer preferences over the year, to track certain styles and product attributes to translate those into future product developments.
- A global comparison of industry 4.0 environments (an industrial model characterized by excellent productive, procedural, and environmental performance; an overall sustainable manufacturing model) has showed Chinese and U.S companies are outpacing other nations in digital technologies.
- The UK is slightly of pace - likely due to Brexit - but is managing to keep up.
- SenseTime, a Hong-Kong based software company that runs the world’s largest artificial intelligence platform, is moving beyond facial recognition software and applying its technology to the car component manufacturing sector.
- This proprietary software - SenseSpring - will detect engine defects; freeing workers from tedious manual inspection work.
- A new covid treatment facility has opened to treat the most vulnerable patients in Singapore, amid a steep omicron wave (current 7-day average at around 11,000 cases a day, as on Feb 16).
- Children aged 5-19 have the highest rate of covid infection in Singapore (122 people per 100,000 population).
- The new facility is kitted with robots, to deliver and collect linens, disinfect, and mist rooms.
Sales & Operations
Walmart is Thriving Despite Supply Chain Woes, High Inflation
- Walmart has posted its largest ever holiday-season sales of $150bn, and forecasts even greater gains going into 2022.
- In the last year, Walmart has raised worker wages, developed multiple streams of revenue, and began chartering ships and containers to take control of its supply chain.
- In the last year, Kraft Heinz Co. stated it lost market share, as it could not make enough Lunchables of Philadelphia Cream Cheese to meet demand.
- Similarly, Kellogg Co. stated some of its iconic cereals have lost ground in U.S grocery stores after multiple worker strikes and a fire slammed its production capabilities last year.
- Virgin Galactic is reopening sales of its $450,000 tickets to outer space, on a 90-minute joyride - a $150,000 deposit will be required with the rest due before the first flight.
- There are already 600 reservations secured from its first round of ticket sales - which were priced between 200,000 to 250,000.
- Home Depot benefited from the DIY frenzy brought on by the pandemic, defying any expectations that consumers would be hesitant to proceed with home renovations with lockdown’s surging.
- Demand for paint, patio furniture, appliances all surged - but Home Depot was constrained by supply chain issues and labor shortages.
- Toyota is halting a factory operation in Japan on Tuesday - approximately 13,000 cars of output - after a supplier of electronic components was hit by a cyberattack.
- This comes after Japan recently joined Western allies clamping down against Russia - although, it is not verified that these events are directly linked.
Company Focused
Honda Maximized Limited Chip Supply in Face of Malaysia Flood, Omicron Impacts
- Honda is allocating its semiconductors to its most profitable and in-demand vehicles as flooding in Malaysia is limiting chip supply.
- The Omicron-covid variant, is also limiting vehicle production - especially in North America, because of low labour availability.
- Google stated that is will be restricting advertisers’ ability to track Android phones - strengthening privacy for consumers.
- However, these changes will not be implemented for another two years, and Google said it will provide substantial notice prior to any change.
- This follows Apple’s decision last year to limit user tracking on iPhones - Apps on iOS must ask permission for every time they track someone.
- Starbucks is introducing a price increase to mitigate rising cost pressures.
- Starbucks has offered new employees higher pay, covid-19 isolation pay among other bonuses to prevent a labour shortage; to keep the company running.
- DHL is investing $400M to expand its medical device and pharmaceutical distribution network.
- This expansion will include six new facilities which will be fully licensed, and temperature controlled to support pharmaceutical storage requirements.
- Amazon has announced it will increase its prime membership fee, due to rising transportation and labor costs.
- This is the first time Amazon has raised these costs since 2018.
Country Focused
Russia attacks Ukraine
- Vladimir Putin has announced a military operation in Ukraine on Thursday, and an invasion has begun.
- Explosions have been recorded in multiple cities, including in the capital of Kyiv.
- Shell has announced that it will be the first supplier of sustainable aviation fuel at Singapore’s Changi airport.
- This fuel is made from waste product, substantiable feedstocks and combined with conventional jet fuel.
- Washington has sent 7,000 troops to Germany to reassure NATO allies.
- Joe Biden announced this move on Thursday (24th Feb.) morning.
- Policymakers in China are moving away from a strict ‘covid-zero’ approach to a ‘dynamic covid-zero’ stance.
- This latter approach does not mean zero infections but rather outbreaks are quickly traced back and contained - with an attempt to create minimal disruption to everyday life.
- Discussions regarding a ceasefire are ongoing at the Belarus border, this comes after immense pressure globally for Russia to withdraw troops.
- Russia has faced an increasing number of sanctions from the West, including Japan, South Korea and Singapore.
COVID-19
Canada to ease travel requirements as COVID cases decline
- Canada will ease entry requirements for fully vaccinated travelers at the end of February, only requiring a rapid antigen test (ART) prior to departure, as opposed to the more costly polymerase chain reaction (PCR) test.
- Canada will be easing several other measures; but will be keeping the vaccine-passport for the time-being.
- This will ultimately help the Canadian economy, which heavily relies on trade and tourism.
- In a surprising turn of events, China has cleared Pfizer’s coronavirus pill (Paxlovid) for use - which may provide insight that China could be moving beyond its covid-zero policy.
- Paxlovid, is the first foreign pharmaceutical product China has endorsed for Covid-19.
- In the first two weeks of February, Covid cases have doubled in Armenia, Azerbaijan, Belarus, Georgia, Russia and Ukraine - many of these nations have low vaccination rates.
- These comments come on the heels of various other European countries, including Poland and the Czech Republic, easing many covid restrictions - including vaccine-passports.
- Stationery, shoes, and clothing - are some of the goods Australian shoppers are finding difficult to find in-store amid international shipping delays.
- Although covid cases in Australia are dropping, cases are persisting globally; and issues are expected for another 18 months.
- Carlos Villazon, a managing director of a logistics company, stated the cost of transporting a 40ft container to Australia pre-pandemic cost between $1000-$1500 USD, now it has surged to $10,000.
- Covid supply chain disruptions are still strong, with small businesses - accounting for 40% of U.S economic activity - bearing the brunt of many hardships; with fewer resources to absorb costs or leverage to push back on price increases.
- The businesses that are able to get their stock, are faced with another issue - port delays - the current container ship backup is 77 on Feb. 14th.
- Essentially, if you can even get your stock, you are lucky.
Miscellaneous
Years After Calling Bitcoin ‘Rat Poision’ Warren Buffett Just Invested $1billion In A Crypto-Friendly Bank
- Warren Buffett’s company - Berkshire Hathaway - has bought one billion dollars’ worth of stock in Nubank.
- Nubank focuses on digital services and allows users to put money in a bitcoin exchange traded fund.
- This comes after Buffett and his partners publicly voicing their distaste for cryptocurrency.
- Next Gen Foods a Singapore based company, makes plant-based chicken alternatives has raised $100 million in a funding round.
- Its competitors include Beyond Meat, Impossible Foods and Nestle.
- Apple music appears to cater to more audiophiles, compared to Spotify’s every-day listener.
- Apple music has a spatial audio feature, which creates a ‘surround sound’ effect, in comparison to Spotify which focuses on high-fidelity audio.
- A 656 ft long ship, carrying Porsches and Volkswagens has caught fire in the North Atlantic - all 22 crew members aboard evacuated.
- There is thought to be thousands of cars aboard this ship, further delaying deliveries.
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