Global Supply Chain Problems are Escalating and Threatening Economic Recovery

Global supply chain bottlenecks are interrelated, and component shortages and rising prices for critical raw materials are putting pressure on manufacturers around the world.

In some areas, supply shocks are already showing signs of impeding recovery.

Part of the problem is the global economy, where pandemics, limits and recovery are out of sync. Factories and retailers in Western Europe, primarily out of the blockage, are anxious for finished products, raw materials and parts from longtime suppliers in Asia and elsewhere. However, many Asian countries are still at risk of blockades and other coronavirus-related restrictions, limiting their ability to meet demand.

On the other hand, the global labor shortage, which often results from people leaving the workforce during a pandemic, is an obstacle to producers.

Bottlenecks are projected to undermine manufacturing production until next year, damaging the sector that until recently was driving a global recovery. According to the German think tank Kiel Institute for the World Economics, global industrial output exceeded pre-crisis levels in early 2021 but has since stagnated. Recently, due to supply chain issues, we have lowered our forecast for global economic growth this year from 6.7% to 5.9%.

Workers will inspect vaccination certificates and Covid-19 test results at a checkpoint in Ho Chi Minh City, Vietnam on October 7.

Supply chain knots help drive inflation to decades high in the United States and parts of Europe, with a focus on consumer spending. Rising inflation is putting pressure on central banks, including the Federal Reserve, to begin aggressively curtailing pandemic stimuli. This is a further headwind for global growth.

It’s often too late to save the entire Christmas retail season. This is because the transportation network around the world is overwhelmed and the supply of even home decoration is limited. “If I can now give one piece of advice to consumers, it’s about finding and buying your Christmas tree early,” said Jamiwarner, Managing Director of the American Christmas Tree Association.

At the heart of the world’s predicament is China, the world’s largest trading nation.

Arriving vessels often have to be quarantined for at least a week before being allowed to dock. Delays increase due to interruptions in customs and port services. The more ships waiting inbound at a Chinese port, the longer it will take to wait for Chinese electronics, clothing and toys to depart from China again to other parts of the world.

Earlier this year, shipping goods from China to South America cost more than five times as much as last year’s pandemic lows, according to data from the United Nations Conference on Trade and Development. Fares on the heavier China-North America route have more than doubled.

Beyond China, the closure of Covid-related factories in Malaysia has hit German automakers with chips in the semiconductor market, which has already been shut down in Texas, Japan and Taiwan. According to supply chain experts, the blockade in Vietnam caused problems for Australian importers.

On June 1, a container ship set sail for Sydney.

In Indonesia, mining companies want more trucks to meet the world’s growing demand for coal and minerals. Still, the waiting list for new truck deliveries is nine months, producers say. Their own supply chain problems make it difficult to supply fuels and materials that help solve supply problems elsewhere, strengthening bottlenecks.

Australian port worker strikes and the Covid-19 incident have reduced operations. Passenger flights to this country, once an air freight carrier’s choice, are still largely suspended.

Marcus Carmont, Executive Director of TMX Global, a supply chain consulting firm in Melbourne, said: “The jailbreak card for using an airplane is not really a lever that can be pulled.”

China is under stress with limited electricity usage caused by its commitment to climate change. Northwestern Xinxi is one of the world’s largest producers of magnesium and is a relatively low-cost mineral that electric vehicle battery makers are paying more and more attention to as EV demand grows.

Last month, an economic planner at one of Shaanxi’s magnesium hubs stopped production or stopped production to meet the region’s 2021 goal of limiting energy use, according to government notification traders and Chinese media accounts. Commanded many producers to reduce. According to industry data, domestic prices for magnesium in China were more than 60% higher in August compared to January.

Magnesium deficiency is one of many reasons that can prevent consumers from finding the car they want around the world.

The new Ford F-Series pickup truck was stored in large numbers on July 16th in Sparta, Kentucky when there was a shortage of semiconductors.

Noriyuki Umezawa, a Mazda dealer in Kashiwa near Tokyo, said he had to wait at least four to five months for the delivery of popular models such as the CX-8 crossover SUV.

According to Umezawa, more and more people are interested in buying a car since the state of emergency was lifted due to a decrease in Covid-19 cases on October 1. “Now we don’t have a car to sell,” he said.

Rakuten Mobile, a division of the Rakuten Group, a Japanese e-commerce company Ltd

It is trying to establish itself as a mobile phone service carrier nationwide, but hoped to market improved services this fall. However, a spokeswoman said the 10,000 base stations that provide speedy data downloads couldn’t be turned on because the company couldn’t connect the chip to the antenna.

The German automobile industry, which accounts for the majority of Germany’s industrial production, has upset workers throughout the year due to the declining and flowing supply of chips. Automakers have prioritized the production of high-margin cars to mitigate the impact of lost sales on profits.

Global industry consultant AlixPartners said last month that as a result of a chip shortage, the global automotive industry will lose 7.7 million cars worldwide, nearly 10% of its projected 2021 production. Production and sales losses are expected to bring $ 210 billion in revenue losses to the global automotive industry this year, he said.

Mark Wakefield, an automotive and industrial practice at AlixPartners, states that automakers are also facing disruptions in the supply of resins and steel.

France’s new car sales fell 35% in July, the sharpest drop in Europe, but fell 25% in Germany, 29% in Spain and 19% in Italy. In the UK, new car sales fell 30% in July. New car sales across Europe fell 18% to 724,710 units in August.

Daimler AG CEO Ora Kerenius said in early September that “demand is unconstrained, supply is constrained,” and the pressure on chip supply hits third-quarter sales and is felt in 2023. Added.

Germany’s economy depends more on manufacturing than many of its European peers. According to the Federal Bureau of Statistics, industrial production in August fell 4% from the previous month, 9% below pre-pandemic levels. He said the weakness was due to reduced production of vehicles and vehicle parts.

Employees of Bosch’s new factory in semiconductor manufacturer Bosch, Dresden, Germany, on May 31st.

According to economists, constraints on supply to manufacturers are squeezing margins and pushing up consumer prices. According to a recent survey by the German Chamber of Commerce, more than a quarter of companies had to cut or stop production.

In Sweden, the economy in August shrank 3.8% from the previous month, below pre-pandemic levels, according to statistics from the Swedish Census Bureau.

Manufacturing output declined in a month as Volvo had to stop car production due to a shortage of semiconductors. “Sweden’s recovery has reached its highest level and the short-term outlook is not as rosy as it was a few months ago,” said David Oxley, an economist at Capital Economics.

In the UK, Glassgow Distillery Co. is set for a long-term planned launch of Scotch whiskey in the United States and postpones the move when supply chain issues begin to affect almost every part of the business. I was forced to do that.

According to co-founder Liam Hughes, whiskey makers find it much more difficult to get the on-time supply of bottles, labels and cardboard that are essential for single malt packaging. It used to take six weeks to secure, but now it can take six months and the price is high.

“Some suppliers have notified us of a 10% increase,” he said.

Whiskey barrels waiting to be bottled at the Glasgow Distillery.

When a Glasgow-based company can get supplies, it has to wait much longer for transportation to the distillery. Once the bottles are ready, global traffic congestion can cost customers up to five times more to transport bottles from the UK to the United States, Hughes said.

As of Thursday, there were 497 large container vessels waiting to dock outside ports in Asia, Europe and North America, with delays in arriving at ports in the United States and Canada from the Far East in June 2020. It increased from 14 hours to almost 13 hours. The number of days in September of this year, according to eeSea, which provides data on the container market.

This summer, T & G Global Ltd

One of Australasia’s largest fruit suppliers, was looking for a ship to carry apple containers to Los Angeles after waiting up to four weeks for apple containers at New Zealand’s harbor. The company typically ships about 800 40-foot apple containers annually to the United States.

As the container ship held up outside the port, T & G had to move some of its cargo to a freezer carrier and charter it with other local exporters. These refrigeration ships can be docked in parts of the port where container ships do not dock, thus avoiding some of the long delays.