Event & News
Will widespread supply chain problems persist into next year?
A supply chain crunch that was meant to be temporary now looks like it will last well into next year as the surging delta variant upends factory production in Asia and disrupts shipping, posing more shocks to the world economy.
Manufacturers reeling from shortages of key components and higher raw material and energy costs are being forced into bidding wars to get space on vessels, pushing freight rates to records and prompting some exporters to raise prices or simply cancel shipments altogether.
The cost of sending a container from Asia to Europe is about 10 times higher than in May 2020, while the cost from Shanghai to Los Angeles has grown more than sixfold, according to the Drewry World Container Index.
The spread of the delta variant, especially in Southeast Asia, is making it difficult for many factories to operate at all. In Vietnam, the world’s second-largest producer of footwear and clothing, the government has ordered manufacturers to allow workers to sleep in their factories to try to keep exports moving. Even mighty Toyota Motor Corp. is affected. The automaker warned this month it will suspend output at 14 plants across Japan and slash production by 40% due to supply disruptions including chip shortages.
On the other side of the planet, companies in the U.K. are grappling with record low levels of stock and retail selling prices are rising at the fastest pace since November 2017. Germany’s recovery is also under threat. A key measure of business confidence in Europe’s largest economy, released on Wednesday by the Munich-based Ifo institute. fell by more than economists had predicted with the drop blamed in part on shortages for metals, plastic products and semiconductors, among other goods.
Big retailers tend to have long-term contracts with container lines, but Asian production relies on networks of tens of thousands of small and medium-sized producers who often arrange shipping through logistics firms and freight forwarders. They in turn have been struggling to secure space for clients as vessel owners sell to the highest bidders.
Buyers agree. In Germany, more than half of the 3,000 firms polled by the Association of German Chambers of Industry and Commerce expected widespread supply-chain problems to persist into next year.
Chinese companies that spent decades shifting production of lower-value components to cheaper labor markets in South and Southeast Asia now face the headache of trying to get those parts to factories where they can be assembled into finished products.
As factories succumb to lock-downs, manufacturers are forced into a game of whac-a-mole, switching raw materials from one country to another. Some have resorted to air-freighting materials such as leather to factories to keep production lines rolling.
Source: https://www.bloomberg.com/news/articles/2021-08-25/the-world-economy-s-supply-chain-problem-keeps-getting-worse
Manufacturers reeling from shortages of key components and higher raw material and energy costs are being forced into bidding wars to get space on vessels, pushing freight rates to records and prompting some exporters to raise prices or simply cancel shipments altogether.
The cost of sending a container from Asia to Europe is about 10 times higher than in May 2020, while the cost from Shanghai to Los Angeles has grown more than sixfold, according to the Drewry World Container Index.
The spread of the delta variant, especially in Southeast Asia, is making it difficult for many factories to operate at all. In Vietnam, the world’s second-largest producer of footwear and clothing, the government has ordered manufacturers to allow workers to sleep in their factories to try to keep exports moving. Even mighty Toyota Motor Corp. is affected. The automaker warned this month it will suspend output at 14 plants across Japan and slash production by 40% due to supply disruptions including chip shortages.
On the other side of the planet, companies in the U.K. are grappling with record low levels of stock and retail selling prices are rising at the fastest pace since November 2017. Germany’s recovery is also under threat. A key measure of business confidence in Europe’s largest economy, released on Wednesday by the Munich-based Ifo institute. fell by more than economists had predicted with the drop blamed in part on shortages for metals, plastic products and semiconductors, among other goods.
Big retailers tend to have long-term contracts with container lines, but Asian production relies on networks of tens of thousands of small and medium-sized producers who often arrange shipping through logistics firms and freight forwarders. They in turn have been struggling to secure space for clients as vessel owners sell to the highest bidders.
Buyers agree. In Germany, more than half of the 3,000 firms polled by the Association of German Chambers of Industry and Commerce expected widespread supply-chain problems to persist into next year.
Chinese companies that spent decades shifting production of lower-value components to cheaper labor markets in South and Southeast Asia now face the headache of trying to get those parts to factories where they can be assembled into finished products.
As factories succumb to lock-downs, manufacturers are forced into a game of whac-a-mole, switching raw materials from one country to another. Some have resorted to air-freighting materials such as leather to factories to keep production lines rolling.
Source: https://www.bloomberg.com/news/articles/2021-08-25/the-world-economy-s-supply-chain-problem-keeps-getting-worse
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