Faltering supply chains: material shortage hits export nation

Status: 09.09.2021 8:46 a.m.

The industry is grappling with the aftermath of the pandemic. The order situation for many companies is good. But a lack of material slows production and exports. This is also shown by the latest figures on foreign trade.

In the early morning, Dieter Keuser and Petra Baron coordinate again. The owner and the managing director of Lahntechnik talk through the upcoming working day. “Before Corona, we had monthly production planning with weekly detailed planning. Today we always have to readjust everything every day,” explains Keuser. “The reason is the lack of material. That disrupts our normal operational processes massively. We can only implement orders that are currently in the warehouse. That has an impact on sales and exports. We have never had anything like this before.”

At Lahntechnik in Nassau in Rhineland-Palatinate, 150 employees produce cooling systems and refrigeration technology – among other things for machine tool construction and the automotive industry. “The orders picked up very well after the Corona crisis,” says Keuser. “Due to the lack of material, we can only process this to a limited extent. Our delivery times have been significantly extended.”

Exports suffer

Ten percent of the cooling units go directly abroad – for example to Austria, Russia or the USA. Another 70 percent of the goods go to domestic customers, where they are further built and then exported. “Because supply chains are disrupted and there is a lack of material, our sales have fallen by five percent. The export business is weak. I still see risks ahead of us,” summarizes Keuser.

It started in the spring with sheet steel, which was suddenly no longer available. Many standard materials were now permanently missing. Some deliveries don’t even arrive because there are hardly any wooden pallets for transport. “At the moment it is mainly electronic components that are missing,” explains Baron. “Drives such as pumps, fans and hydraulic hoses are also hard to come by. At the moment, the problems are getting bigger rather than smaller.”

Ongoing survey among machine builders

Recently, Ralph Wiechers has been hearing more and more complaints like those from Lahntechnik. Wiechers is chief economist of the Association for Mechanical and Plant Engineering (VDMA). “That is why we are currently conducting a survey among our members on the subject of material shortages. The results will be available next week. But I can say that the situation has not eased, it may even have worsened.”

The industry was already suffering from material shortages in August. 70 percent of the mechanical engineering companies saw their production as being significantly more difficult. “That was by far the highest value in this area,” explains Wiechers. In April, the number of companies with a shortage of materials was still 40 percent. In the meantime, all sectors of the industry are even affected. Particularly problematic: the supply of electronic components and steel.

“That slows down additional growth”

“A shortage of materials when the economy is picking up is actually nothing unusual,” explains Wiechers. “But we have never had such a shortage with a very good order situation at the same time. The big question now is: how obstructive are these material bottlenecks?”

The VDMA is expecting a production increase of ten percent this year after the Corona crisis 2020. “With enough material, however, that could have been more. Some of the orders from abroad are simply not available to the companies at the moment. That slows down additional growth. That gives us a headache.”

Manufacturing industry particularly affected

The problem of missing materials and preliminary products does not only affect mechanical engineering, but all areas of the manufacturing industry. That’s what Timo Wollmershäuser says. He is an economic expert at the Ifo Institute. “We have noticed a very serious deficiency. 70 percent of all companies are affected. That goes across the board – from the car industry to the furniture industry.”

According to the Federal Statistical Office, there was even a decline in industrial production in the second quarter, even if a small increase followed in July. The main reason for the downward trend in spring were supply bottlenecks – especially for semiconductors in the automotive sector. This difficult situation is currently continuing. According to a new Ifo study, the number of lawsuits in the industry is increasing. “This is not without consequences for production. The procurement crisis poses a real threat to the upswing,” says the head of the Ifo surveys, Klaus Wohlrabe.

“Production in the companies is weak. This can also be seen in exports,” analyzes Wollmershäuser. As an export nation closely linked to the global economy, Germany is currently particularly hard hit by this development. It is true that exports increased for the 15th consecutive month in July, as the figures presented today by the Federal Statistical Office show. But growth slowed significantly in July and was only 0.5 percent compared to the previous month. In June the rate of increase was still 1.3 percent.

Relaxation in the coming months?

“The difficult overall situation should ease in the coming months,” says the economic expert, looking optimistically into the near future. In the case of wood, for example, prices have now fallen internationally. “That could herald a trend reversal that will soon also be seen in other raw materials and intermediate products.”

At the beginning of next year, Wollmershäuser expects a strong boost in exports and thus for the economy. “The material shortage should then be overcome. The companies can then finally tackle their orders and exports should also pick up significantly again.”

Growing concerns in medium-sized businesses

In Nassau in Rhineland-Palatinate, the Lahntechnik company cannot share this optimism. The order books are full, but sourcing materials is becoming increasingly difficult. “We also have running costs in operation, but because of the shortage a smaller output. In addition, the purchase prices have gone up significantly, which are also constantly changing. It is difficult for a medium-sized company to simply pass this on to the customers,” calculates the managing director Baron in front.

“There are components that can only be manufactured at the beginning of next year and only then delivered,” explains company owner Keuser. “We would be happy if we could start working reasonably normally again in the second half of next year. We still have a dry spell ahead of us. Sales and exports are likely to suffer in the long term.”

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