Virus variants and disasters disrupt the global supply chain

A man is standing on a flooded road after heavy rain on July 23, 2021 in Zhengzhou, Henan Province, China. REUTERS / Aly Song

July 23, 2021

Jonathan Saul, Muyu Xu, Yilei Sun

London / Beijing (Reuters)-A new global wave of COVID-19. Natural disasters in China and Germany. A cyber attack targeting a major port in South Africa.

According to business, economists and shipping experts, the event is pushing the world’s supply chain to its limits, threatening the fragile flow of raw materials, parts and consumer goods.

The delta variant of the coronavirus devastated parts of Asia and urged many countries to block seafarers’ access to land. As a result, the captain was unable to replace the tired crew, and with flashbacks and blockades by 2020, approximately 100,000 seafarers were stranded at sea beyond the stint.

“We are no longer at risk of a second crew change crisis, but at risk,” Guy Platten, executive director of the International Chamber of Shipping, told Reuters. Told.

“This is a dangerous moment for the global supply chain.”

Given that ships carry about 90% of the world’s trade, the crew crisis has cut off the supply of everything from oil and iron ore to food and electronics.

Hapag-Lloyd, a German container line, described this situation as “extremely difficult.”

“Vessel capacity is very small, empty containers are scarce, and the operational status of certain ports and terminals has not really improved,” he said. “We expect this to continue until the fourth quarter, but it’s very difficult to predict.”

Meanwhile, deadly floods in economic powers China and Germany further destroy the world’s supply lines, which have not yet recovered from the first wave of the pandemic, and jeopardize the trillions of dollars of economic activity that depends on them. did.

Floods in China are reducing coal transport from mining areas such as Inner Mongolia and Shanxi, as power plants need fuel to meet peak summer demand, state planners said. I am.

Road transport of goods has slowed significantly in Germany. According to data from the supply chain tracking platform FourKites, the volume of delayed shipments increased by 15% from the previous week due to the disaster in the week of July 11.

Nick Klein, vice president of sales and marketing in the Midwest, along with Taiwanese freight and logistics company OEC Group, said the crisis merged and companies struggled to release goods piled up in ports in Asia and the United States. He said he was doing it.

“It’s not going to be resolved until March,” Klein said.

More pain for car makers

The manufacturing industry is upset.

For example, automakers have been forced to stop production again due to the turmoil caused by the outbreak of COVID-19. Toyota Motor Corp. said it had to shut down its plants in Thailand and Japan this week because parts weren’t available.

Stellantis temporarily suspended production at its UK factory as a large number of workers had to quarantine to stop the spread of the virus.

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

An executive at a South Korean auto parts maker supplying Ford, Chrysler and Rivian said the cost of raw materials for steel used in all products has skyrocketed, partly due to rising fares.

“It costs about 10% to manufacture a product, taking into account rising steel and shipping prices,” an executive told Reuters.

“We’re trying to keep costs low, but it was very difficult. Not only are raw material costs rising, but container ship prices are skyrocketing.”

Europe’s largest consumer electronics maker, Electrolux, warned this week that the parts supply problem that is blocking production is exacerbating. Domino’s Pizza said supply chain disruptions are affecting the delivery of equipment needed to build stores.

US-China struggle

The buckling supply chain is hitting the United States and China, the world’s economic motors, which account for more than 40% of the world’s economic production. This can lead to a slowdown in the global economy, along with rising prices for all kinds of commodities and raw materials.

U.S. data released Friday agrees with growing belief that growth will slow later this year after the rapid growth in the second quarter, boosted by the initial success of vaccination efforts. I am.

Chris Williamson, Chief Business Economist at IHS Markit, said:

The company’s “flash” reading of US activity has fallen to a four-month low this month as companies struggle with inflation-promoting raw material and labor shortages.

This is an unwelcome challenge for the US Federal Reserve and will meet next week just six weeks after withdrawing the reference to the coronavirus as a weight to the economy.

Inflation is far higher than expected, as the Delta variant, which has already forced other central banks to consider restructuring, has fueled a new rise in the US case.

“We need to supply the store”

Ports around the world are suffering from a type of log jam that hasn’t been seen in decades, according to industry insiders.

The China Port Association said Wednesday that freight capacity remains tight.

“Manufacturing in Southeast Asia, India and elsewhere is affected by the recovery of the epidemic, with some orders flowing to China,” he added.

Union Pacific, one of the two major railroad operators carrying cargo from ports on the west coast of the United States inland, suspended freight transportation, including consumer goods, to the Chicago hub where trucks receive goods last weekend for seven days. I imposed.

According to experts, this effort aimed at alleviating Chicago’s “significant congestion” will put pressure on the ports of Los Angeles, Long Beach, Auckland and Tacoma.

This week, a cyberattack struck South Africa’s container ports in Cape Town and Durban, causing further turmoil at the terminal.

If that is not enough, in the UK, official health apps have instructed hundreds of thousands of workers to quarantine following contact with someone on COVID-19. This will warn supermarkets of supply shortages and close some gas stations.

Richard Walker, managing director of supermarket group Iceland Foods, used Twitter to encourage people not to panic.

“We need to be able to supply stores, stock on shelves, and deliver food,” he writes.

(Additional report by Anna Ringstrom in Stockholm, Lisa Baertlein in Los Angeles, Hilary Russ in New York, Joe White in Detroit, Lucia Mutikani and Howard Schneider in Washington, Heekyong Yang in Seoul, edited by Simon Webb, Dan Burns, Pravin Char)

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