Another shipping crisis strikes, threatening to delay Black Friday shopping
The 2021 holiday shopping season could be marred by stockouts and shipping delays, as flooding in Europe and China worsens already strained global supply chains.
Western Europe and China’s Henan Province – a transportation hub and home to several large companies – are grappling with the aftermath of devastating floods.
The disasters damaged the rail lines used for the delivery of goods and raw materials in the two regions. Water rushed into industrial areas, causing significant damage to facilities, machinery and warehouses, companies in the supply chain industry told CNBC.
“Black Friday and the holiday season, where products (and raw materials) are staged, will take the brunt of the impact,” Pawan Joshi, executive vice president of the company, told CNBC. E2open supply chain software.
“Consumer electronics, dorm furniture, clothing and appliances will all continue to be scarce as back-to-school shopping begins and spills over into the peak holiday shopping season,” he said. he declares.
“Consumer electronics, dorm furniture, clothing and appliances will all continue to be scarce as back-to-school shopping begins. “
Delays in distributing the raw materials needed to produce goods will have a cascading effect and disrupt supply chains “for weeks and months,” Joshi said.
Supply chains have already been severely disrupted this year by crises such as the shortage of shipping containers, the Suez Canal incident and the Covid cases – all causing delays at maritime hubs in southern China.
Even though there are offers for peak online shopping season, Joshi said there would likely be fewer and the discounts would likely be smaller. Prices can also increase for some products, he said.
“With Black Friday, we can probably expect to see prices increase for all kinds of goods such as consumer electronics, furniture, clothing and appliances,” he added.
Separately, Apple CEO Tim Cook also said on an earnings call last week that shipping costs were high.
Several companies, including Germany’s largest steelmaker, Thyssenkrupp, have declared force majeure. Force majeure arises when unforeseeable circumstances such as natural disasters prevent a party from fulfilling its contractual obligations, exempting it from penalties.
Some of the industries most affected by the flooding include automobiles, technology and electronics, according to those who spoke to CNBC.
Auto production is at risk of being affected by manufacturing delays, as many of the world’s leading auto manufacturers and their suppliers are based in areas devastated by flooding.
“The flooding has the potential to throw another key in the mix for the auto industry, which is already reeling from a semiconductor shortage,” said Pawan.
Manufacturing facilities in Germany, the Netherlands, Luxembourg and Belgium are expected to bear the brunt of flood damage, supply chain risk management firm Everstream told CNBC via email . Many vendors that provide specialized parts for the automotive, tech and aerospace industries are based there, said Shehrina Kamal, vice president of intelligence solutions at Everstream.
“As the floodwaters began to recede, most of the highways and main roads were due to be cleaned over the past weekend; However, due to the extent of water damage in some affected industrial areas, manufacturing operations are unlikely to resume as quickly, which could impact the availability of supply, ”he said. she declared.
“Since some companies have already issued profit warnings and even declared force majeure, the effects of the floods are likely to continue to trickle down supply chains for several weeks,” Kamal concluded.
The flooding could also disrupt the supply of copper, which is used in many products, from electronics to electric vehicles. Henan province is a major center for copper production, noted Vivek Dhar, a commodities analyst at the Commonwealth Bank of Australia.
Copper prices rose sharply last week due to supply issues, he said, as Henan has seen strong growth in copper smelting in recent years.
“Hopes for copper demand are linked to rebuilding damaged infrastructure in central China. China’s electricity sector is a particularly powerful driver of copper demand, ”Dhar wrote in a note last week.
In Henan’s capital Zhengzhou, the disruption could affect a wide range of industries, from automobiles to pharmaceuticals and biotechnology, said Ryan Seah, APAC intelligence analyst at Everstream.
Zhengzhou is a vital transportation hub and is one of the major Chinese cities along the Belt and Road Initiative, Seah said, referring to China’s gigantic infrastructure plan that spans several countries and continents. He added that the city is home to 91 listed companies in China and a wide range of industries.
Zhengzhou is also home to a major factory run by Hon Hai Precision Industry, also known as Foxconn. It is the world’s largest assembly plant for Apple iPhones. Foxconn had previously told CNBC that he had “activated an emergency response plan for flood control measures at this location.”