A new worldwide wave of COVID-19. Natural disasters in China and Germany. A cyberattack targeting key South African ports.
Events have conspired to drive global supply chains toward breaking point, threatening the fragile flow of raw materials, parts and consumer goods, companies, economists and shipping specialists say.
The Delta variant of SARS-CoV-2 has devastated parts of Asia and prompted many nations to cut off land access for sailors. That has left captains unable to rotate weary crews and about 100,000 seafarers stranded at sea beyond their stints in a flashback to last year and the height of lockdowns.
Illustration: Mountain People
“We’re no longer on the cusp of a second crew-change crisis, we’re in one,” International Chamber of Shipping secretary-general Guy Platten told reporters. “This is a perilous moment for global supply chains.”
Given that ships transport about 90 percent 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 Province, 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 percent from the week before, data from supply-chain tracking platform FourKites showed.
Nick Klein, a vice president for sales and marketing with Taiwanese freight and logistics company OEC Group, said that companies were scrambling to free goods stacked up in Asia and at US ports due to a confluence of crises.
“It’s not going to clear up until March” next year, Klein said.
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 last week said that it halted operations at plants in Thailand and Japan because they could not get parts.
Stellantis temporarily suspended production at a factory in the UK 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 this year — but now some senior executives say it will continue into next year.
An executive at a South Korea auto parts maker, which supplies Ford, Chrysler and Rivian, said that raw materials costs for steel, which is 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 percent more for us to make our products,” the executive told reporters, 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.”
Electrolux, Europe’s biggest maker of home appliances, last week warned of worsening component supply problems, which have hampered production.
Domino’s Pizza said that the supply-chain disruptions were affecting the delivery of equipment needed to build stores.
Buckling supply chains are hitting the US and China, the world’s economic motors that together account for more 40 percent 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.
US data released on Friday last week dovetailed with a growing view that growth will slow in the second 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,” IHS Markit chief business economist Chris Williamson said.
The firm’s “flash” reading of US activity slid to a four-month low this month as businesses battle shortages of raw materials and labor, which are fanning inflation.
It is an unwelcome conundrum for the US Federal Reserve, which is to meet next week just six weeks after dropping its reference to COVID-19 as a weight on the economy.
The Delta variant, already forcing other central banks to consider retooling their policies, is fanning a new rise in US cases, while inflation is running well above expectations.
Ports across the globe are suffering the kinds of logjams not seen in decades, industry players say.
The China Port and Harbor Association on Wednesday last week said 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 said.
Union Pacific, one of two major railroad operators that carry freight from ports on the US west coast inland, this month imposed a seven-day suspension of cargo shipments, including consumer goods, to a Chicago hub where trucks pick up the goods.
The effort, which aims to ease “significant congestion” in Chicago, will put pressure on ports in California’s Los Angeles, Long Beach and Oakland, and in Tacoma, Washington, specialists said.
A cyberattack last week hit South African container ports in Cape Town and Durban, adding further disruptions at the terminals.
If all that were not enough, in Britain the official health app has told hundreds of thousands of workers to isolate following contact with someone with COVID-19 — leading to supermarkets warning of a short supply and some petrol stations closing.
Richard Walker, managing director of supermarket group Iceland Foods, turned to Twitter to urge people not to panic buy.
“We need to be able to supply stores, stock shelves and deliver food,” he wrote.
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