Sourcing in China – Before christmas, things get critical!

In the year two after Corona, DER SPIEGEL speaks of “acute shortages”. This refers to raw materials and goods of all kinds. We can help you with the sourcing.

The shortage of goods affects almost all industries. There is a shortage not only of steel or semiconductors, but also of wood and even paper. The publication of books for the Christmas season is postponed indefinitely or print runs are drastically reduced.

Freight rates 1,000 percent higher than 2019

Freighters are piling up all over the world, waiting to be handled at a container port. Freight rates are soaring to unimaginable heights. We, too, are struggling with uncertainty. Shipowners no longer announce prices until the containers are loaded. This can lead to unpleasant surprises. Those who want goods delivered in the foreseeable future cannot avoid paying high surcharges for a so-called “priority service”. As of today, rates for a 40-foot standard container are up 1,050 percent from October 2019.

Development freight costs 40-foot standard container

Cell phones only in the morning

The developments we are seeing are causing factories to have to scale down production or even close altogether. And that with unbroken high demand. A Zurich Xiaomi dealer told me that he had to ration cell phones and other electronic products so that he could sell anything at all the following day. By noon, he said, it is always completely sold out.

All this is caused by a gigantic yo-yo effect: After the collapse of the economy during the corona pandemic, billions in government aid are now flowing in and fueling the desire to buy. However, during the Conora crisis, transport capacities were reduced worldwide and goods cannot be brought to consumers fast enough. This now threatens to stall again the economy, which has recovered so quickly.

Risk due to gigantic yoyo effect

According to the Kiel Institute for the World Economy, the supply crisis will cost the German economy 40 billion euros. For small and medium-sized companies without purchasing power, supply bottlenecks have become the greatest risk to growth and earnings, as they have few options to switch to alternatives.

There is no quick improvement in sight. Transportation experts expect precarious freight capacity until at least Chinese New Year in February. Christmas is just around the corner. This means that the peak season is in full swing, while in China entire port or aircraft terminals are being closed as corona protection measures, as recently in Ningbo and Shanghai. This creates freight congestion that can no longer be relieved. Because before Chinese New Year, when the Chinese economy traditionally shuts down its operations for a month, everyone still wants to order. Whether things will get better after Chinese New Year, as many experts expect, is still written in the stars for me. That’s what they said last year, and instead it’s only gotten worse.

Unfortunately, we can’t perform miracles either: Freight prices are what they are. The shipowners continue to play their games. However, we can support you well in sourcing. Thanks to our China-wide contacts with manufacturers, even in the less frequented domestic market, we are still able to have our products produced at good prices.

Urs Draeger, C2G Production, urs.draeger@c2g-production.de, 0176 641 271 88.