The rollercoaster of global trade that began to stabilize after the pandemic is once again showing signs of turbulence in 2024. At the forefront of next year's threats to global supply chains is the alarming increase in extreme weather events, as highlighted in Everstream Analytics' annual risk outlook. The United States now faces billion-dollar weather events approximately every three weeks, a stark contrast to the four-month intervals seen in the 1980s. This trend is anticipated to intensify in the new year, exacerbated by record-high ocean temperatures.
An unprecedented drought has resulted in restrictions at the Panama Canal, leading to capacity constraints and extended waiting times for ships attempting to traverse the canal. Bulk carriers, freighters, and tankers are feeling the impact of these limitations. Meanwhile, shipping operators contemplating rerouting cargo away from the Panama Canal are encountering additional challenges in the Red Sea. There, Iran-backed Houthi rebels have escalated attacks on commercial vessels over the past two months. According to Everstream data, at least 22 commercial ships have been targeted in the Red Sea and Gulf of Aden since November. As a result, container shipping capacity through the region has plummeted to just 12.7 percent of its normal levels at times.
Geopolitical instability is also looming large on the list of 2024 risks, with Taiwan predicted to be a primary hotspot, as outlined in the Everstream report. Other key takeaways from the report include a concerning rise in cyberattacks on supply chains, reaching a five-year high in 2023. This trend is expected to persist, with ransomware attacks and data breaches continuing to plague companies, sub-tier suppliers, and logistics providers throughout the coming year.
Contributing Factors to Commodity Shortages in 2024
Then, there is the issue of ongoing commodity shortages. Hopes for a return to normalcy in global commodity markets in the new year have been dashed, as 2024 is expected to see a culmination of factors contributing to these shortages.
High Input Prices: One of the primary drivers of commodity shortages is the soaring cost of inputs for agricultural and industrial production. Farmers and manufacturers are grappling with increased expenses related to fertilizers, fuel, machinery, and raw materials. These escalating input costs erode profit margins, making it economically challenging for producers to maintain or expand their operations. As a result, the production of essential commodities becomes more constrained.
Farm Profitability Concerns: A major concern in the agricultural sector is the profitability of farming operations. Farmers face many challenges, including fluctuating market prices, unpredictable weather patterns, and mounting debt. The precarious financial situation of many farmers puts additional pressure on the supply of essential crops and livestock, as they may be forced to reduce production or exit the industry altogether.
Increasing Protectionism: Protectionist measures, such as tariffs and trade restrictions, have risen globally. These policies can disrupt the flow of commodities across borders, hindering their availability in international markets. As countries prioritize domestic interests over global trade, supply chains become more fragmented and vulnerable to disruptions, potentially exacerbating commodity shortages.
Extreme Weather Events: The impact of extreme weather events on commodity production cannot be overstated. Climate change has led to more frequent and severe weather phenomena, including droughts, floods, wildfires, and hurricanes. These events disrupt crop yields, damage infrastructure, and disrupt logistics and transportation networks. When combined with other factors, such as high input prices and profitability concerns, extreme weather events can lead to acute shortages of key commodities.
This convergence of challenges in 2024 is expected to result in further disruptions to the global supply of essential commodities. These disruptions may occur with limited warning, causing price volatility and potential shortages in critical sectors like food, energy, and manufacturing. In response to these challenges, top commodity-producing countries will likely consider or implement protectionist measures to safeguard their domestic supplies. This could include export bans, quotas, or tariffs on key commodities, further limiting their availability in the international market.
Overall, 2024 presents a complex and multifaceted scenario for supply chains and global commodity markets, with the potential for severe disruptions that could have far-reaching consequences for economies and industries around the world. Finding sustainable solutions to address these challenges will be crucial to ensuring a stable and reliable supply of commodities in the years to come.
JibChain's Solutions for Resilient Supply Chains
JibChain offers a range of supply chain solutions to help build resilient supply chains in this challenging environment:
Supply Chain Risk Management (SCRM) as a Service: JibChain automatically monitors the health of your supply chain in real-time, notifying you of potential vulnerabilities and enabling pre-emptive strategies to limit supply chain disruptions. This ensures business continuity and shareholder value.
Software Supply Chain Risk Management: JibChain orchestrates your software supply chain and risk assessments into one ecosystem view, offering solutions such as Software Bill of Material (SBOM) as a Service, Open-Source Audits, and comprehensive Software Risk Scorecards powered by SettleTop.
Supply Chain Risk Index-SCRI: JibChain provides a risk review that offers a baseline understanding of your exposure, quantifies the risk, and informs you about industry-specific risks relevant to your business and industry. This includes assessments of all global industries, cyber/supply chain software risk, assessments of supplier impact, and a risk management index value score to rapidly identify harm and make critical decisions for business continuity.
Risk Consultancy and Education: JibChain offers SCRM/C–SCRM training to academia, government agencies, and commercial businesses, establishing risk management as an integral part of the business culture and expectations for all stakeholders. This ensures that risk management is deeply ingrained in every aspect of the business.
Ultimately, the ability to address and overcome these challenges will be crucial for ensuring a stable and reliable supply of commodities in the years ahead. Proactive risk management and adaptation will be key to weathering the storm and building resilient supply chains that can withstand the uncertainties of the global trade landscape in 2024 and beyond.
Visit the JibChain website today to learn more about how our solutions can protect your supply chain to help you build a future-proof, resilient, and more competitive business in 2024.