Industry bottlenecks could last until 2023 with China’s brake, analysts say

China’s energy crisis and signs of a prolonged economic slowdown in the Asian country are likely to cause bottlenecks in supply chains and component shortages to last until 2023.

Until the beginning of this year, most analysts estimated that this problem would last until the end of 2021. With the worsening of the international scenario, foreign trade specialists already say that the solution should only come at the end of 2022 or even in the year Following.

China’s GDP (Gross Domestic Product) grew 4.9% from July to September, the weakest pace since the third quarter of 2020 and decelerating 7.9% from the second quarter. The result negatively surprised analysts.

In addition to an energy crisis, worsening real estate indebtedness and new outbreaks of coronaviruses, the weaker outcome of the Chinese economy is also attributed to logistical bottlenecks, with semiconductor shortages and higher freight and raw material costs. .

One of the reasons for worldwide inflation is the rupture of production chains, recalls the consultant and former Foreign Trade secretary, Welber Barral.

“Only in 2023 the chains should be more organized, it is still necessary to reformulate transport routes and there are people exporting coffee by plane, due to the lack of ships. It is not something that can be solved overnight.”

The entire service sector was heavily impacted by the pandemic, and transport and tourism sectors around the world ended up being disorganized, adds Barral. The lack of semiconductors has also slowed the auto industry around the world.

In May, another outbreak had led to the closure of the Yantian terminal, affecting international shipping.

Rising shipping costs and persistent bottlenecks at ports around the world have aggravated the problems affecting supply chains.

At the end of last year, until the first quarter, the expectation pointed that the lack of components would still be overcome in 2021.

In August, a new outbreak of coronavirus partially closed China’s Ningbo-Zhoushan port, and the suspension of incoming and outgoing ships reduced its carrying capacity by a fifth.

Also in August, the chairman of China’s Lenovo Yuanqing Yang told the sheet that the situation should only resolve in 2022.

If there was already a logistical blackout, with the increase in freight and some quantitative restriction on ships, the bottlenecks in microelectronics have created new obstacles for Chinese industrial production, says economist at Iedi (Institute for Industry Development) Rafael Cagnin.

“It’s another challenge, which happens in a systemic way and it should take longer than planned for production to be regularized. On the other hand, it is a medium and long-term incentive for the reorganization of value chains, so that they are closer of consumer markets.”

“New variants of the virus and other waves also ended up changing the profile of demands. During the pandemic, the search for electronic products increased, to digitize some sectors of the economy, which demanded parts, components and chips.”

The economist believes that a positive legacy of the effects of the pandemic on production chains could be the opening of spaces outside Asia, such as Latin America, to install production in locations closer to the consumer market.

“But this is an open game and there is a lot of uncertainty as to how it will happen. And it will also depend on the capacity of countries, like Brazil, to take advantage of these opportunities.”

As long as the market does not adjust, this problem will continue to worry the industry around the world, assesses José Augusto de Castro, president of the AEB (Brazilian Foreign Trade Association).

“In the automotive industry, this bottleneck is more visible, but it is a problem that affects the entire chain. As a result, part of the products that were manufactured in Brazil will need to be imported.”

Castro says that the rupture of production chains is a more serious issue than it seemed at the beginning of the countries’ reopening process. “We will still miss components and imported items in the first half of next year, maybe even in the second. This will only come back little by little.”

For João Leal, from Rio Bravo, the lack of components is one of the sources of greatest concern today, and it is still difficult to foresee a consistent improvement in the global supply chain.

“This scenario ends up making normalization even more difficult after the pandemic. And it should last, at least, until mid-2022, which brings pressures of deceleration in the economy and in inflation.”

Economist at Bradesco and director of Economics at CEBC (Brazil-China Business Council), Fabiana D’Atri, is more optimistic. She says she believes that, although the process of normalizing the chains is taking longer than anticipated, this could take place in the coming months.

“China is partly to blame, but it is not the only piece of this puzzle. With a lower demand for goods, as the reopening consolidates, production should be re-established. In a very general way, throughout over the next few months, we see signs of a return to normality.”