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theflasherman

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supply chain shock

Yom Kippur War

Freight Waves, the global supply chain magazine, published an extraordinary piece last week.

It argued that the second Cold War is here and entire supply chains will be rewritten as a consequence.

Freight Waves chief executive Craig Fuller wrote:

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We are witnessing the remaking of the world order in front of our eyes, and this will impact global supply chains in unforeseen ways.

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We are about to experience the most dramatic and unpredictable supply chain map we have experienced since World War II. If the Russia Ukraine conflicts international ramifications keep spreading, we face a real possibility of a bifurcating global economy, in which geopolitical alliances, energy and food flows, currency systems, and trade lanes could split.

Mr Fuller predicted Western companies would start to shift sourcing away from the East and more toward Western and neutral states.

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North American economic integration will become a new priority. Surface transportation across the Eurasian continent will become more complex, and possibly contested.

Entire supply chains will be rewritten, with new sources and partners, all in the interest of corporate and national security. The future market winners will be the corporations that make the investments in supply chain infrastructure and reliable, Western friendly production locations.

https://www.abc.net.au/news/2022-03-06/why-global-supply-chains-will-be-rewritten-in-coming-years/100875330

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Are we on the cusp of another cycle, even a super cycle, caused by the Ukraine situation? Definitely many commodities, soft and hard, food and mineral, have run on as the supply chains are disrupted shortages emerge. But then, I read the other week (Jarad Dillian):

One theme I have been harping on in my newsletters is that commodities tend to make V tops, and stocks tend to make V bottoms. But when stocks top, they make big, rounded U tops, and when commodities bottom, they make big, rounded U bottoms (the oil bottom in 2020 is the exception, where prices went negative). We are seeing a lot of V tops in commodities, and correspondingly, we’re going to see a V bottom in stocks..
 
 
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April 2022 World Bank report. Outlook on how the conflict is impacting on commodity markets, 2022 to 2024.
Investing/trading in the appropriate stocks/markets might offset the hikes across all price points.

From the report, here is a selection of 2022 forecast percentage changes from 2021. Note some commodities over the same period went negative.

Coal - Australia: up 81.1%

Crude oil - Brent: up 42.0%

Natural gas - Europe: up 111.0%

Fertilizer - Potassium Chloride: up 147.4%

Coffee - Arabica: up 21.9%

Meat/chicken: up 41.8%

Palm oil: up 45.9%

Cotton - A Index: up 39.0%

Wheat - US HRW: up 42.7%

Aluminium: up 37.5%

Nickel: up 51.6%

Timber (-4.5%) along with Tea, Rice and Silver are in the negative.

WASHINGTON, April 26, 2022—The war in Ukraine has dealt a major shock to commodity markets, altering global patterns of trade, production, and consumption in ways that will keep prices at historically high levels through the end of 2024, according to the World Bank’s latest Commodity Markets Outlook report.
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