At 66 percent, the vast majority of German companies still complain about material shortages and delivery bottlenecks. Triggered by the corona pandemic, the problems have not disappeared even after more than two years. But why?
Now the carbon dioxide is also running out: Across the country, several breweries have already cut production and are considering short-time work. Up to 40 percent of the other deliveries are missing. The carbon dioxide crisis is one of the more curious problems that the German economy has had to deal with for more than two years now. The corona pandemic triggered a global supply crisis in 2020 that is still ongoing today. In a monthly survey conducted by the Ifo Institute in Munich in September, 66 percent of companies stated that they were suffering from a shortage of materials and delivery bottlenecks. This means that the value has even risen again compared to August.
Not every industry is affected equally, because not every raw material and every intermediate product is missing in the same way. For example, mechanical engineering and the manufacturers of computers and computer accessories lead the list with 86 percent each, while metal producers and wood goods manufacturers are much less affected with 32 percent.
But what specific raw materials and intermediate products are missing? Why are they missing? What are the implications? And how long will the shortage last?
The most obvious shortage in these times is the lack of natural gas, triggered by the initially reduced and now suspended supplies from Russia. However, the energy crisis is affecting German companies in two different ways. The first problem is the need to conserve natural gas yourself – also because it may be available but has become insanely expensive. This affects energy-intensive sectors such as steel manufacturers, who fire their furnaces with natural gas, but also chemical companies, which manufacture many other products such as plastics from the gas. This, in turn, sets a chain reaction in motion, because the products from the metal and chemical industries are needed, for example, in car construction and pharmaceutical production.
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A second problem is triggered by the global shortage of natural gas, because it means that products made from natural gas are also becoming scarce. The carbon dioxide crisis mentioned above is an example of this, because almost half of the world’s carbon dioxide is produced in the production of fertilizers, which in turn are produced almost exclusively from natural gas. Not only do beverage manufacturers lack gas, but also farmers lack fertilizer.
The natural gas crisis cannot be solved so quickly. Of course, Germany can also meet its needs from other countries such as Norway or Qatar, but prices will remain high. After all, supplies from Russia are missing on the entire world market. According to its own statements, the country exported 37 percent less gas from January to the end of August than in the previous year. Globally, this means a shortage of 3.7 percent, and that at a time when global demand is rising again significantly with the end of the corona pandemic.
Computer chips were one of the first intermediate products that became scarce during the Corona crisis. This is due to a monopolization of production. 64 percent of the semiconductors used worldwide come from Taiwan. When factories here had to scale back production or even close down during the Corona crisis, the market collapsed. To make matters worse, there were confusions with the orders. For example, car manufacturers canceled many orders because they sold fewer cars during the crisis, i.e. could produce less. The gap was filled by electronics manufacturers. As the pandemic subsided, automakers ordered back orders and producers in Asia were overwhelmed.
In the meantime, Asian manufacturers have expanded their production capacities, which is why the crisis is slowly easing. Cristiano Amon, head of the manufacturer Qualcomm, estimates that many sectors can be supplied normally again by the end of the year. This does not apply to the automotive industry, which, according to an analysis by Porsche Consulting, will probably have to struggle with deficiencies up to 2025.
In the long term, the USA and the EU want to improve the situation by building up a domestic industry again. But that will probably last until 2030.
The list of metals that are currently missing from Germany’s factories is long. Steel, aluminum, magnesium, nickel, palladium, copper… everything is rare.
The industrial metals crisis has many causes. Russia is an important supplier of many raw materials, which has been absent since the beginning of the war. The high energy prices are having a negative impact on the business of metal processors, who provide the industry with steel and aluminium, for example. Many cut their production because they could no longer sustain the rising prices.
Many metals, especially magnesium and rare earths, are mainly mined in China. Due to the energy crisis, the smelters of metal producers often stood still here, and due to the strict no-Covid policy, production plants and ports were repeatedly closed. The drought German summer also contributed to the crisis, because many metals are shipped via the Rhine in Germany – and shipping was restricted for a long time due to low water.
The end of the metal crisis will depend on the development of the corona pandemic in China and on energy prices in Europe. The situation could therefore improve in 2023 at the earliest.
The German fashion industry is at the forefront when it comes to material shortages. In contrast to other sectors, there is less a lack of raw materials here – although polyester is currently scarcer than usual – than actually of the end products. The reasons for this can also be found in Asia, because most of the shoes, shirts, pants and jackets sold in this country are made in China, Vietnam, India and Bangladesh.
There are two problems there: First, factories have been and are at times closed due to corona outbreaks. More serious, however, is the problem that the textiles have to be shipped from Asia to Germany. However, there is a lack of containers and ships. The otherwise perfectly oiled supply chains have been derailed by the pandemic and uneven global recovery, as well as by shock events such as port closures in China and the blockade of the Suez Canal last year. At times, container ships were four times overbooked and freight rates had reached insane levels.
The situation is now relaxing. The Hamburg shipowner Hapag-Lloyd recently reported only an average overbooking of 20 percent. In addition, empty containers would be returned faster and the traffic jams in Chinese and American ports would ease. Freight rates have already fallen by 20 percent this year, but are still many times higher than before the pandemic.
The energy crisis, of all things, could ease the situation in the textile industry. The high global inflation they have triggered means that there is a risk of a recession in Germany, the EU and the USA. In this climate, people consume less, so they buy new clothes less often. The falling demand in turn leads to falling production and thus fewer containers that are needed for transport.
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