SAWT BEIRUT INTERNATIONAL

| 14 April 2024, Sunday |

Global supply chains buckle as virus variant and disasters strike

COVID-19 has resurfaced in a fresh wave over the world. China and Germany have also experienced natural calamities. A cyber attack has been launched against important South African ports.

According to corporations, economists, and shipping experts, events have conspired to push global supply chains to breaking point, jeopardizing the fragile flow of raw materials, parts, and consumer goods.

The Delta version of the coronavirus has wreaked havoc in Asia, prompting many countries to restrict sailors’ access to land. In a flashback to 2020, at the height of the lockdowns, this has left captains unable to rotate fatigued crews, leaving nearly 100,000 seafarers stranded at sea beyond their tenure.

“We’re not on the verge of another crew change problem; we’re in the middle of one,” Guy Platten, secretary general of the International Chamber of Shipping, told Reuters.

“Global supply chains are under jeopardy right now.”

Given ships transport around 90% of the world’s trade, the crew crisis is disrupting the supply of everything from oil and iron ore to food and electronics.

German container line Hapag Lloyd described the situation as “extremely challenging”.

“Vessel capacity is very tight, empty containers are scarce and the operational situation at certain ports and terminals is not really improving,” it said. “We expect this to last probably into the fourth quarter – but it is very difficult to predict.”

Meanwhile, deadly floods in economic giants China and Germany have further ruptured global supply lines that had yet to recover from the first wave of the pandemic, compromising trillions of dollars of economic activity that rely on them.

The Chinese flooding is curtailing the transport of coal from mining regions such as Inner Mongolia and Shanxi, the state planner says, just as power plants need fuel to meet peak summer demand.

In Germany, road transportation of goods has slowed significantly. In the week of July 11, as the disaster unfolded, the volume of late shipments rose by 15% from the week before, according to data from supply-chain tracking platform FourKites.

Nick Klein, VP for sales and marketing in the Midwest with Taiwan freight and logistics company OEC Group, said companies were scrambling to free goods stacked up in Asia and in U.S. ports due to a confluence of crises.

“It’s not going to clear up until March,” Klein said.

MORE PAIN FOR AUTOMAKERS

Manufacturing industries are reeling.

Automakers, for example, are again being forced to stop production because of disruptions caused by COVID-19 outbreaks. Toyota Motor Corp said this week it had to halt operations at plants in Thailand and Japan because they couldn’t get parts.

Stellantis temporarily suspended production at a factory in the U.K. because a large number of workers had to isolate to halt the spread of the virus.

The industry has already been hit hard by a global shortage of semiconductors this year, mainly from Asian suppliers. Earlier this year, the auto industry consensus was that the chip supply crunch would ease in the second half of 2021 – but now some senior executives say it will continue into 2022.

An executive at a South Korea auto parts maker, which supplies Ford, Chrysler and Rivian, said raw materials costs for steel which was used in all their products had surged partly due to higher freight costs.

“When factoring in rising steel and shipping prices, it is costing about 10% more for us to make our products,” the executive told Reuters, declining to be named due to the sensitivity of the matter.

“Although we are trying to keep our costs low, it has been very challenging. It’s just not rising raw materials costs, but also container shipping prices have skyrocketed.”

Europe’s biggest home appliances maker, Electrolux, warned this week of worsening component supply problems, which have hampered production. Domino’s Pizza said the supply-chain disruptions were affecting the delivery of equipment needed to build stores.

U.S. AND CHINA STRUGGLE

Buckling supply chains are hitting the United States and China, the world’s economic motors that together account for more 40% of global economic output. This could lead to a slowdown in the global economy, along with rising prices for all manner of goods and raw materials.

U.S. data out Friday dovetailed with a growing view that growth will slow in the last half of the year after a booming second quarter fueled by early success in vaccination efforts.

“Short-term capacity issues remain a concern, constraining output in many manufacturing and service sector companies while simultaneously pushing prices higher as demand exceeds supply,” said Chris Williamson, chief business economist at IHS Markit.

This month, the firm’s “flash” reading of U.S. activity fell to a four-month low as businesses grapple with raw material and manpower shortages, which are fueling inflation.

It’s an unwanted conundrum for the US Federal Reserve, which meets next week just six weeks after removing the coronavirus from its list of economic concerns.

The Delta variation, which has already compelled European central banks to rethink their policies, is fueling a new uptick in U.S. cases, with inflation well beyond estimates.

‘WE NEED TO SUPPLY STORES’

Ports across the globe are suffering the kinds of logjams not seen in decades, according to industry players.

The China Port and Harbor Association said on Wednesday that freight capacity continued to be tight.

“Southeast Asia, India and other regions’ manufacturing industry are impacted by a rebound of the epidemic, prompting some orders to flow to China,” it added.

Union Pacific, one of two major railroad operators that carry freight from U.S. West Coast ports inland, imposed a seven-day suspension of cargo shipments last weekend, including consumer goods, to a Chicago hub where trucks pick up the goods.

According to experts, the endeavor, which intends to relieve “severe congestion” in Chicago, will put strain on ports in Los Angeles, Long Beach, Oakland, and Tacoma.

This week, a cyber attack attacked the South African cargo ports of Cape Town and Durban, causing further delays at the terminals.

As if that weren’t enough, the official health app in the United Kingdom has advised hundreds of thousands of workers to isolate after coming into touch with someone who has COVID-19, causing retailers to warn of a shortage and some gas stations to close.

Richard Walker, the managing director of Iceland Foods, took to Twitter to advise consumers not to panic buy.

He wrote, “We must be able to supply retailers, stock shelves, and deliver food.”

    Source:
  • Reuters