Shortage : The products that are missing and those that could soon be
25 November 2021
25 November 2021
Since the beginning of the year and after several seasons of lockdown and quarantines, the price of raw materials has risen, even exploded. This situation reinforces the fear of shortage at the end of the year, while production schedules and construction sites are overloaded.
Inflation in France is generally stable and varies very occasionally, mainly due to the price of oil. This year alone, we are witnessing an exceptional increase in the price of energy and raw materials.
Electricity prices are set to rise by 2022, and the effects are beginning to be felt as Europe has already seen a general rise in electricity prices for individuals and industry.
In the countries that have the most difficulty connecting to the European electricity grid, Ireland for example, people have already been warned of possible power cuts this winter.
Like energy, raw materials are essential to production and have been in high demand during the general and precipitous recovery of activity. The variation in their price is therefore very important since, as the basis of the production process, it then influences the entire budget.
This year, the price of materials has skyrocketed: bought at 1900 euros in 2020, copper is now selling for 9600 euros, the price of aluminum has almost doubled in one year, that of steel more than tripled. These price increases obviously have an impact on many other sectors.
First of all, it is necessary to remind that many factories and warehouses are resuming their activity on a just-in-time basis. Pandemic having stopped everything, everyone has to catch up, restock and respond immediately to the demand with products that have just been stored.
Since the activity has resumed suddenly and everywhere, the demand for materials has exploded and so has the price of transport. The producing countries first choose to satisfy the demand on their territory before answering the external demand. France, which relies heavily on the import of foreign materials, suffers enormously.
In the case of wood, after Donald Trump's decision to tax Canadian wood, Americans have disrupted its price by seeking supplies on the European market.
The shortage of stocks causes delays in the construction site, which affects the delivery times provided for in the estimate. In case of delay, the project manager receives penalties for late work. The French Building Federation has requested a freeze on late penalties when the delay is due to late delivery of materials.
At the furniture stores, the references are starting to be lacking in spare parts. Shortages of raw materials and transportation difficulties (especially maritime) are the cause of these shortages on the shelves.
In March 2021, the Ever-Given, a ship crossing the Suez Canal with nearly 20,000 containers ran aground. On board the ship during the crossing were containers of IKEA products. In total, billions of dollars worth of goods were lost and billions of dollars were blocked on other ships, delayed, until the container ship was cleared.
While some brands are reassuring about the end of the year by saying that they are not yet in trouble, IKEA is losing products and is reducing the production of its furniture variants to focus on basic references. It has already announced that some references would arrive only in early January, in a trickle.
In the mobile industry, semiconductors are what is missing. Considered the most common material in the hardware industry, it is a big issue because of its shortage since the global pandemic.
Semiconductor is a chemical compound that allows the control of electric current since it can conduct electricity under certain conditions, but not under others. The main application areas for this conductor/insulator are industry 4.0, aerospace and automotive.
Cars today require technological power and electrical systems that only semiconductors can handle. A car can contain on average between 200, if it is a small model that keeps the basic functionalities, and 1500 if the technological input is higher. Hybrid models may need up to 3000.
Thousands of vehicles could not be produced in 2021 because of the lack of semiconductors. Production stoppages are increasing and the firm Alix Partners predicted in May that this shortage would cost automakers up to 110 billion in revenue in 2021. Renault announced at the end of October a possible loss of 500,000 vehicles this year and the temporary closure of half of its plants.
The shortage affects technological sectors but also more ordinary products. This is the case for paper pulp. Demand exploded after the economic recovery, but rising energy and raw material prices and transportation problems are slowing down the ability to satisfy everyone.
Price of paper pulp has never risen so fast. Paper pulp mills are ramping up to meet demand from some sectors that fear higher prices or even a shortage. An additional problem and a structural explanation this time: in Asia, many plants are still not back in operation since the health crisis erupted, and others are even being forced to shut down again.
If at the moment the price increase is only felt by the manufacturers who produce at a higher price and by the traders who buy at a higher price, it is certain that a future price increase of the finished products to guarantee a margin is inevitable.
It is at the end of the year that the booksellers are the most coveted. They are afraid of printing delays or even the impossibility of being able to print the desired volume of books.
Like building materials, cotton is also becoming scarce. In three months, its price has risen by 40%, which poses problems in the design of clothing since production costs are soaring.
Some brands are preparing for delays in launching production for the end of year collections. Those who produce mainly in Asia are most at risk, as the dangerously increasing cases of Covid-19 in the south of the continent are slowing down textile factories.
In the summer, 30 to 35% of the factories are at a standstill. The resurgence of cases and the very low rate of vaccination in this region do not give much hope that these plants will resume full production. This is why major clothing brands are preparing, or have already taken the step, to relocate their production.
At present, a problem on the sizes is already posed in store. As for the furniture, references are preferred to ensure the minimum lack on the shelf.
As Christmas approaches, toy stores are wondering if they will be able to meet the precise expectations of Christmas lists. The CEO of JouéClub is reassuring that by having anticipated inventory shipments as early as the end of the summer, the shortage on the shelves should not be felt during the holidays.
To learn more about the risk of stock-outs at Christmas, click here
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