This year, supply chains everywhere have been hit by massive disruptions, from container shortages to flooding and COVID infections leading to port closures.
The energy crisis in mainland China and Europe is the latest to shake shipping.
Capital Economics called this a “concern”, noting that the number of ships waiting outside China’s ports has risen again in recent weeks. According to a research firm, the average number of ships in the seven days till September 30 was 206, while the average number of ships in 2019 was 82 before the pandemic.
Julian Evans Pritchard, senior Chinese economist at the research firm, said power distribution along the supply chain could hinder the port’s ability to ship orders.
The closure of a factory in Vietnam, where many companies relocated their manufacturing industries during the US-China trade dispute, also affected production of many goods.
Here, we’ll look at what types of products will be impacted for the holiday shopping season at the end of the year as recent developments hamper shipments again.
Energy crisis in China and Europe
The power outage in China caused widespread upheaval as local governments ordered power cuts in many factories. Europe is also grappling with a major gas shortage.
According to industry watchers and analysts, what is happening in both the sectors is the worst-case scenario disrupting supply chains across the world.
Factories in China and Europe have temporarily closed or at least reduced production due to the energy crisis. Don Tiura, president of Sourcing Industry Group, said higher energy prices would lead to higher manufacturing costs, and consumers would see the biggest impact in the form of higher prices.
Rising energy prices in Europe will have “severe chain effects” on the region’s food supply chain, Tiura said.
“Rising costs have forced major fertilizer plants to cut production, preventing farmers from producing enough food,” she explained.
2. Carbonated drinks, dry ice, canned foods
Per Hong, a senior partner at consulting firm Kearney, said the pressure on fertilizers leads to a reduction of carbon dioxide, a “very interesting by-product” used in a wide range of consumer products.
“With reduced fertilizer production, we are almost certain to face a global shortage of widely used CO2. CO2 is widely used in the food value chain to keep fresh and dry ice from packaged foods. Keep frozen foods cold. During delivery, foam up carbon dioxide (such as soda and beer).”
This points to a vulnerability in the global food supply chain, Hong said.
3. Apple iPhone, Electronics, Toys
According to Hong, several major Apple suppliers have closed their factories in China. In fact, he said, the entire electronics industry, which has already recovered from a major chip shortage, is likely to suffer.
“This is likely to normalize in the long run, but in the near future, these power limits and cuts in China could push export prices higher and worsen inflation during the holiday season,” Hong said. There is. Toys and clothing are also likely to be affected.
4. Christmas decorations
Companies have warned that the demand for Christmas decorations will be very high.
“People who want to buy holiday trees and other ornaments this holiday season must buy them before Thanksgiving, or they risk paying with their nose or getting nothing.” National Tree Company CEO Chris Butler said. Supply chain turmoil in China.
Other sectors that felt the biggest and most direct impact of the crisis included metals, chemicals and cement, said Pawan Joshi, executive vice president of supply chain software company E2open. These are all energy intensive.
Vietnam closed in Southeast Asia
Gareth Leather, Senior Asian Economist at Capital Economics, said that COVID’s shutdown of factories and labor shortages in Southeast Asia caused “significant short-term upheaval, resulting in significant reductions in production in Vietnam, Thailand and Malaysia.” “I am.”
The situation in Vietnam appears to be particularly important, as many companies have moved production from China during the US-China trade war.
Companies with significant investments in Vietnam include Nike (43%), Lululemon (33%) and Under Armor (40%), financial services firm BTIG said in a September memo.
1. Sports shoes and sports clothing
Bank of America estimated in a memo released last week that production of about 100 to 150 million pairs of sports shoes was lost in Vietnam due to the shutdown.
BTIG reported that the closure of Vietnam has affected more footwear than sports apparel.
Meanwhile, Lululemon CEO Calvin McDonald said in a statement last month that Vietnam’s closures and port-related issues contributed to supply chain disruptions and increased costs.
According to analysts, the closure of factories in Malaysia has affected car production.
Bank of America has said in a recent note that even after the restart of Malaysia, supply constraints will remain for some time.
The turmoil in chip supplies from Malaysia is also curbing car production in China, according to Capital Economics.
According to analysts, apart from sports, other industries dependent on manufacturing in Vietnam include toys, clothing and even coffee.
winter is coming
Everstream Analytics’ Jenna Santoro said there is a potential for product shortages and price hikes as winter approaches.
“The natural increase in winter gas demand could further exacerbate the shortage,” Santoro said. “In a season of low inventory and high demand, rising prices may continue to rise.”