May 05, 2021
If you’ve been putting off home maintenance tasks – like tune-ups, repairs, or replacements in your plumbing, heating, cooling, or electrical systems – then now is the best time to take care of them. Not only for the safety, health, and comfort of your home, but also because experts are predicting that the supply-chain slowdown sparked by the pandemic last year looks likely to worsen this summer and last into 2022 – potentially limiting the availability of parts and equipment.
The global supply chain – the intricate system that links raw materials suppliers, manufacturers, distributors, and consumers together – is currently “a mess,” according to the Wall Street Journal. Breakdowns in the supply chain began with the start of the COVID-19 crisis last year and have been worsened by a continuing string of calamities, including shipping shortages, factory fires, winter weather, and the blocking of the Suez Canal by a ginormous container ship.
These interruptions of the global supply chain have especially impacted three of the most important foundation industries of the modern economy: shipping, computer chips, and plastics. And as the threat of the pandemic starts to lessen here in the U.S., supply-chain issues are forecast to continue worsening as the booming economy causes demand to skyrocket. Worst of all, consumers like you are stuck at the very end of this collapsing supply chain.
The global shipping industry isn’t something most consumers think about much; it’s just an invisible process that somewhat magically delivers an Amazon.com package to your doorstep. But it’s a key element in the global supply chain. About 5,400 massive container ships sail the oceans, carrying about 20 million containers to markets worldwide, filled with every type of product imaginable. Most of them come from Asia, and particularly China, which hosts 70% of the largest container ports in the world.
So, when early last year, COVID-19 shut down China for two months, it created a terrible shipping backlog. The Ports of Los Angeles and Long Beach – which handle half of total U.S. imports from Asia – have been inundated and overwhelmed since, with backups being described by a Federal Maritime Commissioner as “the worst ever seen.” Vast container ships continue to stack up, unable to reach berths and unload the goods consumers are waiting for.
Then the giant Ever Give container ship got caught sideways for a week this spring in the Suez Canal, the shortcut that saves more than 6,000 miles in ocean travel between Asia and Europe. Hundreds of ships lined up to navigate through the canal, which typically accommodates only about 50 vessels per day. Shipping slowed even further worldwide, and U.S. consumers awaiting household appliances, equipment, and parts continue to anticipate their eventual arrival.
While the shipping disaster has definitely contributed to the “chip famine,” a few other factors are also at play. First, demand for computer chips has risen dramatically during the pandemic, especially for electronics and 5G. Second, a major Japanese computer-chip factory caught fire, negatively affecting supply. And third, Taiwan – the source for 60% of the world’s chips by value – experienced an extended drought, drying up the pure water necessary to manufacture computer chips.
For home-maintenance purposes, many of today’s heating and cooling systems incorporate computer chips, so consumers needing system repairs or replacement may be left with longer and longer wait times as the year continues.
The Gulf Coast is home to the world’s largest petrochemical complex, which turns oil, gas, and other byproducts into plastic. Almost 100 critical chemicals and broadly used derivatives are processed in Texas, including raw materials monoethylene (MEG), polyethylene (PE), and polypropylene (PP). Plastics made from these chemicals are used in all sorts of products – including appliances, resins, and adhesives.
The COVID-19 lockdowns of 2020 initially caused chemical inventory levels to drop, but when Hurricane Laura forced some petrochemical factories in Texas and Louisiana to shut down last year, 10-15% of U.S. PE and PP production stopped overnight. Then, Texas was hit hard this February by a deep freeze it wasn’t prepared for in any way, and the state’s petrochemical plants had to rush to implement emergency shutdowns in order to avoid accidents and permanent damage.
These facilities, which produce a substantial part of the world’s plastics, are slowly and carefully coming back into operation, but it’s predicted it will be more than six months before they fully recover from the winter storm known as Uri.
Today, as the economy strengthens, and consumers begin to emerge from lockdown with full vaccinations and stimulus checks to spend, that surge in demand will also turn up the pressure on the global supply chain, and disruptions within it are likely to grow for a while. As already-struggling inventories continue to deplete, manufacturing will be crippled, prices will climb, and delivery times – which are the longest ever in 20 years of data collection – will be delayed even longer.
Experts expect intensifying supply-demand imbalances in various areas as our economy continues to open, and realistically forecast supply-chain issues to continue well into next year. The system will eventually adjust, but it will require new-level investments in time and money – and for consumers, in extreme patience.
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