“Mattress producers to car manufacturers to aluminum foil makers are buying more material than they need to survive the breakneck speed at which demand for goods is recovering,” says a recent article in Bloomberg, and “the frenzy is pushing supply chains to the brink of seizing up.”
Shortages and bottlenecks are at record levels, the article reports, “raising concern that a supercharged global economy will stoke inflation.” It cites comments from Cumming chairman Tom Linebarger: “You name it, and we have a shortage on it,” he said, adding that high demand across the board is triggering clients to buy up whatever they can.
The difference between the current supply crunch and those of the past is “the sheer magnitude of it,” the article notes, along with the fact that there is no clear end is sight. The situation has been made worse by a series of calamities that have “rocked commodities in recent months,” including a Suez Canal accident, drought, and a deep freeze across the central United States.
At the core of the issue, the article reports, is “a U.S. economy that’s recovering faster than most,” with evidence in the form of dozens of container ships floating off the coast of California waiting to offload goods. Blockages are especially acute across East Asia, with a dearth of semiconductors spanning the auto industry to “Asia’s highly complex supply chain for smartphones.” The article cites comments from Vincent Tsui of Gavekal Research, who says that the chip crunch represents more than a short-lived disruption: “They are more structural in nature,” he argues, “and they affect a whole range of industries.”