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Fresh Covid-19 outbreaks in Asia disrupt global transportation and chip supply chains

Hong Kong — A new wave of Asian Covid-19 clusters, whose vaccination campaigns remain in their early stages as Western countries regain their vibrancy, creates new bottlenecks in global supply chains, boosts prices and post-pandemic Recovery.

The outbreak in one of the world’s busiest ports in southern China has caused global transport delays, and infections at key points in Taiwan’s and Malaysia’s semiconductor supply chains have exacerbated global chip shortages and automobiles. And hinders production in the technology industry.

New headaches have spurred inflation concerns after China and the United States recorded the largest annual rises in factory gate prices and consumer prices this week for more than a decade, respectively. If these problems continue and worsen, they can put pressure on global growth.

For most of last year, China, Taiwan, and many other parts of Asia have controlled pandemics better than the United States and Europe, limiting some of their economic damages. However, as vaccination rates are rising in Europe and the United States, the government has begun to withdraw regulations and the economy is recovering.

Meanwhile, vaccination efforts in Asia have fallen behind, and authorities are largely implementing stricter border controls to prevent the virus. Still, Covid-19 has spread. While Thailand has been hit by the worst new case surge in history over the past two months, Vietnam has also been an increasingly popular manufacturing hub, significantly avoiding the wave of previous infections.

Low immunization rates across Asia may maintain social distance rules and travel bans, which will disrupt manufacturing and curb personal consumption.

“This is a very fragile time when the recovery in world trade is just beginning to recover,” said Nick Malo, Hong Kong-based chief analyst for world trade at the Economist Intelligence Unit.

Healthcare workers in protective clothing will conduct a Covid-19 test in Zhuhai, China, on June 8.


Photo:

China Daily / Reuters

Shioda, a container port in Shenzhen, southern China, has virtually stopped traffic due to the outbreak of port workers, adding to the burden on the international shipping industry, which is suffering from a persistent shortage of empty containers and a week-long blockage. Is on. Suez Canal earlier this year.

According to the broker, some ships had to wait up to two weeks to carry their cargo in the salt pans, waiting for about 160,000 containers to be loaded. According to the Freightos Baltic Index, the price of shipping a 40-foot container to the west coast of the United States has jumped to $ 6,341. This is a 63% increase from the beginning of the year, more than triple the price of the previous year.

Shioda processed nearly 50% more cargo last year than the busiest US container port, Los Angeles, and in the first quarter of this year, container volume increased 45% year-on-year. Hua Joo Tan, an analyst at Singapore-based Liner Research Services, said that port activity, which handles more than 13 million containers annually, is currently at 30% of normal levels and delays can last for weeks. ..

Lars Mikael Jensen, network director for Danish shipping giant AP Moller-Maersk A / S, said Shenzhen’s backlog is felt globally and will affect the products sold at Wal-Mart. Co., Ltd.

And Home Depot Co., Ltd.

A company that has established a distribution base around the port.

“It’s a huge and very active port, and delays there can have a spillover effect on supply chains around the world,” said Jensen, who is diverting 40 container ships from salt pans to other ports, including Hong Kong. Said. The blockade of the Suez Canal lasted for a week, and it took 10 days to clear the backlog, he said.

“There is no end here. The Chinese will keep closing everything until it is certain that Covid will not spread,” he said.

Meanwhile, Taiwan, which accounts for one-fifth of the world’s chip manufacturing capacity, including a significant proportion of the chips used in the automotive industry, has suffered the worst Covid-19 outbreak since the pandemic began.

At King Yuan Electronics Co., Ltd.

One of the island’s largest chip testing and packaging companies, more than 200 employees tested positive for the virus this month, another 2,000 workers were quarantined, and the company’s revenue this month is about It has been reduced to one-third.

Meanwhile, other nearby semiconductor companies are working on outbreaks in their workplaces, according to officials in Miaoli County, Taiwan, where recent clusters are concentrated.

Taiwan Semiconductor Manufacturing Co., Ltd.

Even though it accounts for only 92% of the world’s most sophisticated chip production, it is still unaffected, but it is happening next to its headquarters in New State, Taiwan.

Brady Wang, a semiconductor analyst at Counterpoint Research, said the outbreak in Taiwan’s tech sector “of course … would exacerbate the shortage,” given that the chip industry is already experiencing a serious global shortage. Stated.

Malaysia is home to many foreign factories involved in the manufacture of chips and capacitors, resistors and other major modules used in consumer electronics and automobiles, and is involved in the wave of Covid-19 cases. Activities are taking place.

Infineon Technologies AG

A German semiconductor maker with two factories in Malaysia was told by health officials to close one of the factories earlier this month, delaying the delivery of some chips. According to the company’s spokesman Gregor Rodehueser, the company’s other global factories are operating at high capacity and cannot regain their margins.

After an employee tested positive for Covid-19 at another Malaysian plant operated by TAIYO YUDEN Co., Ltd.

As a precautionary measure, the Japanese electronics and semiconductor component manufacturer has extended its holidays to Monday for another 10 days.

The 1,300-foot container ship, which had blocked the Suez Canal for six days, was released and began to move north, the Suez Canal Authority said. WSJ’s Rory Jones describes rescue operations and what happens next. Photo: DPA / Zuma Press (Video from March 29, 2013)

Overall, the Malaysian Semiconductor Industry Association states that the blockade will reduce production by 15% to 40%.

“It will somehow disrupt the supply chain somewhere,” said Wong Shu Hai, president of the group.

The shortage of semiconductors has permeated SMEs who are feeling the effects of delayed deliveries and rising prices.

Hector Martinez, who runs Rye Autocare in Rye, NY, said: Tires are scarce and parts prices have risen 20% in the last two months. “

In May 2020, a cargo ship can be seen near Yantian Harbor in Shenzhen, China.


Photo:

Martin Polard / Reuters

In addition to hitting companies in the technology and automotive supply chains, the turmoil could add headwinds to China’s export sector. This is one of the strongest pillars of China’s economic recovery and could increase global inflationary pressure.

Shen Jianguang, chief economist at online retail market JD.com, said China has played a key role in curbing global inflationary pressures as manufacturers have absorbed significant input cost increases to date. came. Of a corporation

Beijing’s finance department. However, the recent port turmoil risks spilling over to higher consumer prices around the world.

Outbreaks in Shenzhen’s hometown of Guangdong account for about one-tenth of China’s economic output, with some manufacturers raising prices temporarily to avoid further declines in profit margins. It even stopped production.

Logistics company Jizhi Supply Chain Service Yiwu Co. Zhu Guojin, a consultant at Zhu Guojin, said: “This is the first time that China has seen a decrease in port capacity of this magnitude.”

Zhu says most of his clients, including Amazon.com, while shipping prices to the U.S. are skyrocketing Co., Ltd.

Vendors and some American importers are paying.

“Last year, many clients postponed shipments in the hope of lowering costs, but that’s no longer the case,” Zhu said. “Most people don’t seem to care about the price anymore.”

Some government officials and analysts have so far downplayed the impact.

On Thursday, China’s Commerce spokesman Gao Feng said the revival of Guangdong’s Covid-19 had not yet had a significant impact on foreign trade. Of the state’s approximately 2,000 exporters, more than half say new orders are still higher than they were a year ago.

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Semiconductor analyst Wang is optimistic that the outbreak in Taiwan will have a minimal impact on chip production and does not expect the situation to worsen significantly.

It is not clear when the strain will subside. Many Asian governments are aiming to eradicate the Covid-19 case, so supply chain conditions can worsen before they improve, even if that means short-term financial distress. There is.

“Currently, the most important issue is to contain the outbreaks in these particular companies and prevent them from spreading further,” said Patrick Chen, head of research for securities firm CLSA in Taiwan. “If we can’t do that, we will face much more serious confusion.”

Some companies can also benefit from a roaring supply chain.Stocks of several Chinese shipping companies, including China’s state-owned Cosco Shipping Holdings Co., Ltd.

Hong Kong-listed stocks, one of the world’s largest freighter operators, surged 14% on Thursday, hoping for a sustained rise in containership transport rates, reaching a record high in more than a decade.

Write to Stella Yifan Xie (stella.xie@wsj.com), Costas Paris (costas.paris@wsj.com), Stephanie Yang (stephanie.yang@wsj.com)

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Fresh Covid-19 outbreaks in Asia disrupt global transportation and chip supply chains

Source link Fresh Covid-19 outbreaks in Asia disrupt global transportation and chip supply chains

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