Supply chain normality “could return by next spring”

Supply chain shortages persist, but recent reports suggest that container ship congestion is continuing to ease from the bottlenecks experienced during the height of the pandemic and in the aftermath.

Bloomberg reports one example in the US; the number of fully loaded container ships congregated off the coast of Southern California. Here a bottleneck began developing in October 2020 with five ships, grew to more than 40 in February 2021 as locked-down Americans bought merchandise, then briefly dipped to nine in June last year before resurging to 60 a year ago and peaking at 109 in January 2022. However, at the start of this month the figure had dwindled to eight.

“Our workforce is now managing reasonable levels, and the stress level is down,” said Kip Louttit, executive director of the Marine Exchange of Southern California & Vessel Traffic Service Los Angeles and Long Beach. “We’re back to being in a good place.”

The reports suggests that after two years of chaos in supply chain circles, a return to normality is evident. According to the latest Logistics Managers’ Index, “September’s future predictions hint at normalisation and a return to business as usual over the next year.”

Offsetting this more positive trend, the global economy is still beset by several problems as companies continue to struggle with shortages of parts and workers. Fragile supply chains are heading into another holiday season vulnerable to shocks ranging from freakish weather and dockworker strikes to China’s Covid lockdowns and Russia’s war in Ukraine.

Denmark’s Sea-Intelligence has been tracking shipping trends. The Copenhagen-based research and analysis firm noted in a report last week that about half of shipping congestion has been resolved, and by one measure, “a full reversal to normality should come in March 2023.” Another Sea-Intelligence model that compares the current situation to snarls experienced in 2015 concurred that “normal” is within reach in early 2023, barring any more unexpected disruptions:

Port congestion is also easing in Germany, according to the latest reading of trade flows monitor the Kiel Trade Indicator, which reflects demand as much as it does improvements on the supply side. “September trade has been characterized by weak demand for goods from China through Europe and North America,” reports Vincent Stamer, head of Kiel’s trade gauge. But there’s still work to be done to free up cargo that’s bogged down globally on waiting ships, with some of Kiel’s numbers showing many freighters still stuck:

Swiss freight forwarder Kuehne+Nagel International AG reports similar findings, with cargo congestion lower than its early-2022 peak but delays still elevated in volatile economic times.

Bloomberg Economics reports that its global heat map shows conditions cooling from the pressures that were flashing red as 2022 began. Metrics like delivery times and producer prices have come off their peaks, and most are trending toward yellow and green.

An indicator of supply strains in the US issued by forecaster and analyst Oxford Economics shows that it peaked in February 2022 and slowly but steadily improved in the months since, helped by the fact that cash-strapped consumers in developed economies are spending less. “Supply chain conditions should stay on a more encouraging trajectory in the final stretch of 2022 and in 2023. One of the benefits of weakening demand is it will ease stress in supply chains,” said Oren Klachkin, Oxford’s lead US economist.

Bloomberg comments that the easing of transport snarl-ups is less welcome news for companies that have prospered since early 2020. Spot rates for shipping containers have plunged about 60% this year as carriers struggle with the opposite problem they faced a year ago — excess capacity. Carriers are reducing the number of individual voyages in a practice called “blank sailings” — or cutting entire service loops altogether — to match their available space with demand.

While cargo owners welcome the falling rates after record-high prices of the past two years, it is also bringing an end to the most profitable period in container shipping history. Moody’s Investors Service has cut its outlook for the industry to negative from stable as the supply-demand imbalances lurch back to the carriers’ disadvantage in a weaker global economy.

New ships launching in 2023 and 2024 may hasten the industry’s reversal of fortunes. The order-book-to-fleet ratio of 28% is the highest since 2010, according to Moody’s, and that increase in capacity will exceed projections for global trade volumes. “Although service reliability issues and elevated freight rates will likely persist into 2023 as the transportation ecosystem continues to right itself, we believe that carriers’ earnings have now peaked as an increased supply of vessels meets weakening demand,” stated Moody’s.

EU commissioner sees future role for digital euro

A Europe-wide central bank digital currency (CBDC) could co-exist and complement existing payment options rather than displace the euro, says European Union Commissioner Mairead McGuinness.

Speaking on the first day of the 2022 Sibos conference in Amsterdam, McGuinness said the development of a digital euro would involve cooperation with the private sector and the aim would not be to replace traditional banknotes.

“A digital euro would be a companion to the physical euro which would keep its rightful and important role. The digital euro would provide an alternative, not a replacement to private means of payment,” said the EU commissioner for financial stability, financial services and the capital markets union said. “We see a major role for private payment service providers in the distribution of the digital euro.”

McGuinness added that the European Commission will introduce a legislative proposal next year to lay out the principle for a digital euro. “This is a necessary step before the potential issuance of a digital Europe by the ECB,” she said.

Her comments come after Swift's announcement last week that it had successfully trialled how CBDCs could be used globally and converted into fiat currencies. The trial involved France and Germany, as well as HSBC, UBS and Standard Chartered. According to Swift, the success of the experiment demonstrated that the cross-border payment network could be linked with distributed ledger technology (DLT) networks.

Singapore’s central bank launches ESG impact hub

The Monetary Authority of Singapore (MAS) has launched the ESG Impact Hub, aka the Hub, to spur co-location and collaboration between environmental, social and governance (ESG) fintech start-ups, financial institutions and real economy stakeholders.

The Hub will also anchor industry-driven sustainability initiatives such the Point Carbon Zero Programme and KPMG's ESG Business Foundry.

The launch takes place as ESG fintechs and organisations are already set up at the Hub. MAS will continue to engage key stakeholders in building the Hub’s onsite community and fostering partnerships to enhance financial sector access to high quality climate and sustainability data, to support more efficient deployment of capital towards green and sustainable projects.

MAS said that the Hub seeks to capitalise on the strong industry interest in Project Greenprint to encourage a green finance ecosystem since its launch in December 2020 and expedite the growth of Singapore’s ESG ecosystem on three fronts:

• Growing ESG FinTechs: The Hub will facilitate the discovery, scaling and deployment of technology solutions to address ESG needs of corporates and financial institutions, notably in terms of accurate measurement, reporting and verification of climate and sustainability data.
• Anchoring ESG Enablers: MAS will engage knowledge partners, financial institutions and investors to organise key ESG initiatives out of the Hub, such as ESG FinTech accelerator programmes, training and capacity-building workshops, and thought leadership events.
• Supporting ESG Stakeholders: MAS will engage the Hub community to deploy its programmes and solutions to drive material, quantifiable impacts that support sectoral transition efforts, with particular emphasis on the eight focus sectors identified by the Green Finance Industry Taskforce (GFIT).

“The establishment of the ESG Impact Hub is a critical milestone in Project Greenprint’s journey to build a vibrant and robust ESG ecosystem in Singapore, underpinned by technology and data,” said MAS Chief Sustainability Officer, Dr Darian McBain. “This physical Hub will augment MAS’ plans to launch a digital Greenprint Marketplace next year to catalyse the growth of the region’s online ESG community; and will serve as the launchpad for public-private partnerships that support Asia’s just and sustainable transition to a low carbon economy.”

SEC approves “pioneering” corporate debt fund

The US Securities and Exchange Commission (SEC) has approved the creation of a new investment product to exclusively invest in debt securities such as bonds and corporate debt paper issued by companies operating in the Philippines.

The SEC said ATRAM Unitized Corporate Debt Vehicle Inc. was authorised to act and operate as the country’s first-ever corporate debt fund. The fund will be managed and principally distributed by ATR Asset Management Inc.

The fund’s initial offer would raise Peso (PHP) 1 billion (US$16,97 million), which will comprise one billion units of participation at P1 per unit, through a fund that will be called ATRAM Unitized Corporate Debt Fund 1, or ACDF-1.

“ACDF-1 shall be primarily offered to qualified buyers under private placements within six months from the commencement date, with a term of two years from the issue date and for a minimum initial investment of P1 million,” the SEC said. The debt fund would eventually offer 50 billion units, subject to remaining requirements.

A corporate debt vehicle offers a fixed number of units or securities to “any number of qualified buyers and/or non-qualified buyers not exceeding 19 persons in the Philippines during any 12-month period with the specific objective of investing in the corporate debts of large corporations and medium-sized enterprises.”

The fund will then invest in bonds, notes, commercial papers, debentures and other evidence of indebtedness, whether secured or unsecured, of large corporations and medium-sized enterprises operating or deriving income in the Philippines, the SEC said.

ATRAM Unitized Corporate Debt Vehicle is the first company to apply for a corporate debt vehicle offer under the SEC’s rules issued in 2020. The new investment product is intended to support the liquidity needs of large and medium-sized corporations in the aftermath of the Covid-19 pandemic, the regulator added.

ECB and PBoC extend currency swap deal to 2025

The European Central Bank (ECB) announced that it has extended for a further three years its currency swap deal with the People’s Bank of China (PBoC), which aims to ensure that eurozone banks do not run out of renminbi.

The arrangement will run through 8 October 2025, with its maximum size unchanged at RMB350 billion and €45 billion (US$43.65 billion).

“From a Eurosystem perspective, the arrangement serves as a backstop facility to address potential sudden and temporary RMB liquidity shortages for euro area banks as a result of disruptions in the renminbi market,” the ECB said.

The PBoC said the renewal would help deepen bilateral financial cooperation, facilitate trade and investment, and maintain the stability of the financial market.

Mastercard platform offers data-driven treasury intelligence

Mastercard has marked the opening day of Sibos 2022 in Amsterdam with the launch of Global Treasury Intelligence, described as a cloud-based analytics platform that enables organisations to execute more effective and sustainable financial strategies, and support corporate priorities such as cash management, risk assessment and environmental, social and governance (ESG) goals.

It said that businesses often struggle with visibility into how and where they spend money—and with which suppliers. In a recent poll of treasury professionals, 91% of respondents noted they still used spreadsheets for forecasting. Mastercard added that the new service will address this need.

“By automating data ingestion from clients’ enterprise resource planning (ERP) systems, Global Treasury Intelligence provides a view of all payment flows across suppliers, commodities, and lines of business, integrated with relevant third-party data. This holistic view means companies can more efficiently and collaboratively analyse global payments and manage risks. It can be used for narrow applications like identifying opportunities for expansion of commercial cards, as well as broader applications like cash management, source to settle pay strategies, treasury services optimization, supplier ESG scoring, and Know Your Supplier assessments.

“HSBC is an early adopter of Mastercard’s Global Treasury Intelligence because of the insights it gives us into the needs of our clients. By unlocking this data-driven collaboration with our customers, we see how to best help them achieve their goals for treasury,” said Brian Tomkins, Global Head of Commercial Cards, HSBC.

Mastercard Global Treasury Intelligence was developed in collaboration with Robobai, a global provider of source-to-settle analytics with nearly US$1 trillion dollars of spend under management.

KPMG teams with IBSFINtech in India on integrated platform

KPMG in India and Indian treasury tech company IBSFINtech announced an alliance relationship to offer their clients a holistic suite of corporate treasury automation solutions, to help accelerate digital transformation of their treasury function.

“Digitising the treasury function helps in building operational resilience and aids in enhancing the treasury function’s performance. The technology-driven digitalization being witnessed currently, has not only enabled the treasury function to manage risks efficiently, but has also helped in streamlining cash flow management, thereby competently optimising opportunities,” they announced in a release’

“Organisations that do not adapt and align their business models and key financial practices such as treasury management with the digital revolution may lose the opportunity to be ahead of the curve.

Rajosik Banerjee, Partner and Head – Financial Risk Management, KPMG in India commented: “Treasury teams are looking to modernise their processes and improve their operational resilience. The alliance with IBSFINtech for treasury automation will enable organisations to harness treasury technology quickly, automate manual processes, reduce dependency on spreadsheets and legacy technology, and improve cost efficiency. Together, we are excited to offer clients a seamless proposition, which is easy and quick to implement, and helps in reducing cost overheads across treasury, risk and compliance.”

Finastra and Kotak jointly launch corporate banking portal

Financial software provider Finastra has partnered with India’s Kotak Mahindra Bank to support its new integrated corporate banking portal, Kotak FYN.

The two have been working together since October 2021 to expand the Kotak FYN portal for business and corporate customers. The bank’s customers can use the new enterprise portal to carry out all trade services.

By the end of 2022, the Kotak FYN portal, utilising Finastra’s Unified Corporate Portal solution, will include other services, including account services, payments and collections; thereby eliminating the need for multiple logins and disparate user interfaces.

“Working together with Finastra, the Unified Corporate Portal will allow us to make the Kotak FYN portal even more revolutionary,” said Shekhar Bhandari, president global transaction banking, Kotak Mahindra Bank. “We can provide intuitive, easy-to-use access to many products and user journeys through a single platform, reducing complexity and friction for our customers and providing a truly differentiated user experience.”