As Western economies revived, the outbreak in Asia created a new bottleneck in the global supply chain.
A new outbreak in one of the world’s busiest ports in southern China has led to delays in global shipping. Along with that, the infection situation at key points of the semiconductor supply chain, such as Taiwan and Malaysia, is exacerbating the global chip shortage.
The fresh events raised concerns about inflation, after China and the United States this week posted the highest jumps in producer and consumer prices, respectively, in more than a decade. If the situation gets worse, they could affect global growth.
For much of last year, China, Taiwan and many other parts of Asia controlled the pandemic better than the US and Europe, which should limit some of the economic damage. But thanks to a sharp increase in vaccination rates, the West began to relax restrictions and the economy gradually recovered.
Meanwhile, Asia lags behind in vaccination, with authorities largely opting for tighter border controls to prevent the virus from entering. And Covid-19 is still spreading. Thailand has been battered in the past two months by the highest number of new cases ever. Vietnam – an increasingly important production center, although it controlled the epidemic well last year, it is now also affected.
Low vaccination rates across Asia could lead to continued lockdowns and social distancing regulations, disrupting manufacturing and constraining consumer spending. “This comes at a really delicate time as we are just starting to see a recovery in global trade,” said Nick Marro, an analyst at the Economist Intelligence Unit.
Yantian Port in Shenzhen, Guangdong in May 2020. Photo: Reuters.
At Yantian, a container port in the city of Shenzhen, a new outbreak among port workers has congested traffic, adding to the strain on the international shipping industry, which has already struggled with shortages. containers and a week-long congestion in the Suez Canal earlier this year.
Some ships have had to wait up to two weeks to receive their cargo at Yantian, with about 160,000 containers waiting to be loaded. The price to ship a 40-foot container to the US West Coast has risen to $6,341, according to the Freightos Baltic Index, up 63% year-to-date and more than three times from a year earlier.
Last year, Yantian handled nearly 50 percent more cargo than the Port of Los Angeles, America’s busiest container port. In the first quarter of 2021, container volumes increased by 45% from a year earlier. Hua Joo Tan, an analyst at Liner Research Services (Singapore) said the port handles more than 13 million containers a year, and is currently 30% higher than normal, so delays could be lengthy. in a few weeks.
Lars Mikael Jensen, head of AP Moller-Maersk A/S, the Danish shipping giant, said the backlog in Shenzhen will have a global impact, affecting Walmart and Home Depot merchandise. .
“It’s a big and very dynamic port. Delays there will affect supply chains around the world,” said Jensen, who said the company is redirecting 40 container ships from Yantian to other ports, including Hong Kong. “There is no immediate change. The Chinese remain closed until it is certain that Covid-19 will not spread,” he said.
Meanwhile, Taiwan, which accounts for a fifth of the world’s chip-making capacity, is suffering its worst outbreak since the pandemic began. At King Yuan Electronic, one of the island’s largest chip testing and packaging companies, more than 200 employees have tested positive this month. Another 2,000 workers have been quarantined, reducing revenue by about a third this month.
TSMC, the world’s largest contract chipmaker, which accounts for 92% of global sophisticated chip production, said it remained unaffected. However, the outbreak is happening right next to their headquarters in Hsinchu, Taiwan. With the global chip shortage already strained, the outbreak “of course makes the situation worse,” said Brady Wang, semiconductor analyst at Counterpoint Research.
Malaysia, which has several foreign-owned factories involved in the production of chips, capacitors, resistors and other key modules used in consumer electronics and automobiles, also saw activity. production is affected.
Infineon Technologies AG, a German semiconductor manufacturer with two factories in Malaysia, has been ordered by health authorities to close one facility, delaying some orders. According to Gregor Rodehueser, a company spokesman, the company’s other global factories are operating at high capacity and cannot share the delayed orders.
Taiyo Yuden, a Japanese electronics and semiconductor component factory in Malaysia, has extended its shutdown by 10 days, after detecting a few more positive cases. The Malaysian Semiconductor Industry Association said the blockade would reduce output by 15% to 40%.
The semiconductor shortage has hit small businesses, with slower deliveries and higher prices. Hector Martinez, CEO of Rye Auto Care in New York said everything related to electronic parts came late. “Tires are in short supply and the price of spare parts has increased by 20% in the past two months,” he said.
In addition to the impact on companies in the supply chain, the disruption could put a strain on China’s export sector – one of the strongest pillars of the economic recovery – and add to pressure. global inflation.
Shen Jianguang, chief economist at online retail firm JD, said China played an important role in staving off global inflationary pressures, as manufacturers have absorbed most of the rise. of input costs. However, the latest disruption in Yantian threatens to push consumer prices higher around the world.
Guangdong is the province to which Shenzhen belongs and is China’s most populous province, contributing about a tenth of the country’s economic output. The outbreak of Covid-19 there has caused some manufacturers to raise prices and even suspend operations to avoid further eroding profit margins.
“This is terrifying. It’s the first time we’ve seen such a large-scale decline in port capacity in China,” said Zhu Guojin, a consultant at logistics firm Jizhi Supply Chain Service.
On June 10, Chinese Ministry of Commerce spokesman Gao Feng said that the Covid-19 outbreak in Guangdong has not yet had a clear impact on foreign trade. Of the province’s roughly 2,000 exporters, more than half said new orders were still higher than a year earlier.
Semiconductor analysts are also optimistic that the impact of the outbreak in Taiwan on chip production will be minimal, arguing that things will not get significantly worse.
Patrick Chen, head of Taiwan research at CLSA, a brokerage, said the most important issue was to contain the outbreak at specific companies and prevent it from spreading outside. “If that’s not possible, then we’re going to face a much more severe disruption,” he said.
Some companies can benefit from difficult supply chains. Shares of some Chinese shipping companies such as Cosco Shipping Holdings – one of the world’s largest freighter operators – jumped as much as 14% on June 10, to their highest in more than a decade, thanks to the forecast. Container shipping rates will continue to increase.
According to VnExpress
