Phillipe Moreau had to get creative to keep Temahome’s production lines running after shortages of wood, resin and steel left half of his furniture maker’s 600-item catalog out of stock earlier. This year.
“We had fun,” said the managing director of the French manufacturer of wooden tables, shelves and TV stands. “If black panels were not available, we switched to oak or white.
Manufacturers of everything from cabinets to cars to computers around the world are still grappling with a logistics crisis that has disrupted the supply of essential inputs, threatening the post-pandemic economic rebound and increasing inflation.
Combined with growing consumer demand as economies reopen, these shortages in Europe have led to inflation reaching a ten-year high – a factor that could cause the European Central Bank to cut its pandemic stimulus package by 1.85 billion euros this week.
Home furnishings, the latest sector to feel the pinch in the supply chain, sums up the broader issues. Even giant companies like Ikea have been affected. The Swedish flatbed furniture maker has said it “cannot predict” when normal supplies will resume due to a “perfect storm of problems” which includes a shortage of truck drivers in the UK.
“We’re not naive to think it’s over in the weeks or even the next few months,” Henrik Elm, Ikea’s global sourcing manager, said of the disruptions.
A record one in three furniture manufacturers in the EU say they have been affected by supply shortages, according to a quarterly European Commission business survey. Globally, high shipping costs and delivery delays due to bad weather and Covid-19 closures at major Asian ports are key pinch points.
Transportation was a “nightmare” where even “a screw or a small component from Asia can take three months,” said Moreau de Temahome, who also heads the French furniture trade organization. “We had 16 containers shipped to the United States in June and July and they still hadn’t shipped in August. Delivery times to the United States have doubled.
Transportation costs have skyrocketed. Between China and Europe, fees are now nearly seven times higher than in August last year, according to data provider Freightos.
To get around this problem, Ikea says it is diverting some supplies to trains. “We will use rail transport from China to Europe to free up container capacity that we can use to ship more to the United States,” the company said.
In the United States, meanwhile, the lumber supply typically trucked through the southern states was disrupted by Hurricane Ida, which hit the Gulf Coast last week.
Despite this, global lumber prices have halved from their record highs in May, although they remain above pre-pandemic levels. Other sectors are less fortunate.
Almost half of the EU’s rubber, machinery and computer producers, and most manufacturers of electrical equipment, report supply shortages. Almost 60% of car manufacturers remain concerned.
In Germany, where auto production is 30% below pre-Covid levels, Volkswagen plans to add additional teams to eliminate an order book. But new Asian Delta variant outbreaks have shut down key ports and semiconductor manufacturing facilities there, thwarting plans. It is a common problem throughout the industry.
“If you have to receive goods from Asia, it is difficult to find containers, and that clearly creates difficulties,” said Matteo Tiraboschi, executive vice president of the Italian group Brembo, which manufactures automotive braking systems. . But Brembo is helped to the extent that it sources locally, which places the company “in a rather privileged position”.
Others are struggling to meet demand. A DIHK survey of German companies found that 83 percent reported price increases or delivery problems for raw materials, intermediates and merchandise in August.
This has wider economic consequences. The lack of inputs for companies like Temahome, which sells to more than 45 countries around the world, has limited exports and held back growth in the euro area.
The gap between orders and production – which reached its highest level in August in the IHS Markit survey of purchasing managers of euro-zone manufacturers – is adding inflationary pressure.
In July, euro area producer prices rose at an annual rate of 12 percent, the fastest since record highs began in 2001, while consumer inflation hit a decade high in 3 percent in August.
When the disruptions will be resolved remains an open question. It also varies by industry.
VW believes the supply of computer chips “will remain very volatile and tight” in the third quarter of this year.
But Ana Boata, head of macroeconomic research at credit insurer Euler Hermes, believes full normalization will not take place until 2023, the result of a decade of underinvestment in shipping. Morten Engelstoft, managing director of APM Terminals, also warned of a “vicious cycle” created by increased demand and suggested that a slowdown in consumption is needed for shipping groups to catch up.
Others are more optimistic. Giovanni Arvedi, founder and chairman of the Italian steel group Arvedi, said the steel market “boomed at the start of the year. . . but this is no longer the case ”while the closed blast furnaces restart.
The generally optimistic view is that labor and input shortages will ease as demand in Western economies rebounds, leading to a recovery “that is simply more spread out.” . . over a few quarters than a weaker overall recovery, ”said Bert Colijn, senior economist at ING.
The most pessimistic opinion is that it is too early to tell.
“Uncertainty remains as to how the stability of global supply chains and the management of the coronavirus pandemic will develop, particularly in China, Europe and the United States,” said Andreas Möller, spokesperson. word of Trumpf, a German machine tool and laser technology company. “These two factors are the Achilles heel of our operations around the world. “
Additional reporting by Richard Milne in Oslo
