“Capitalism has been the only system in history in which wealth has not been acquired through plunder, but through production, not by force, but through trade, the only system that has defended the right of men to their their own mind, their work, their life, themselves ”
― Ayn Rand
The outbreak of the pandemic triggered one of the largest falls in industrial production in the world, followed by the rapid rebound in industrial demand, driven by limited opportunities to spend on services, and generous fiscal supports in many countries.
In the early stages, demand outstripped the production of industrial goods (automobiles, home furnishings, and electronics). However, the difficulties that weighed on industrial production were amplified due to the series of bottlenecks that affected supply.
From the beginning of the year, US and German electronics manufacturers were able to increase their capacity utilization rates. The automotive sector, could not keep up with the improvements of other sectors, and inventories suffered.
Industrial demand and blockades led to a more pronounced reduction than usual in inventories in relation to demand. Although since August the shortage of inventories began to decrease in some sectors, although there is still a long way to go. The notable exception is the automotive sector, where the global shortage of semiconductors continues to hamper their production.
Rising prices and transportation bottlenecks have exacerbated physical input shortages, the global automotive and electronics sectors have been suffering from the semiconductor chip crisis.
In the last quarter of 2021, 49% of manufacturing companies in the European Union reported that equipment was a factor limiting their production. Apart from the shortage of microchips, German companies suffer from shortages of steel, plastics, electronics and metals.
A third of manufacturing companies in the United States said that the reason for the reduction of their production in the second quarter of 2021, was the shortage not only of semiconductors, but of basic components such as transistors and glue.
The sectors facing the smallest inventories are leather, machinery, IT and electronics, electrical equipment, and textile manufacturing.
Input limitations are not only due to physical limitations, but also to rising prices. Since the start of the pandemic, steel prices in the United States have nearly doubled, pressures from input shortages have increased as transportation bottlenecks have deepened. Port closures in China, heavy congestion at European and American ports, fueled by a lack of workers available to clear cargo, and a general shortage of containers have caused significant delays.
Shipping costs for containers have skyrocketed, increasing more than five times since the start of the pandemic and more than doubling in the last six months. New orders for container ships have more than doubled in the last 12 months, the consolidation in the shipbuilding industry since the global financial crisis, means that the development of additional capacity will take considerable time, although the expected setback in the growth in world trade should provide some relief.
We expect supply restrictions to be fully eased until the second half of 2022. Relief to the semiconductor crisis and its supply problems is expected until mid-2022.
Reference-www.eleconomista.com.mx