The coronavirus pandemic has literally slammed the brakes on the global economy over the past two years – a virus that started by crippling people’s mobility before its far-reaching consequences very soon made their presence felt in the economy as protective measures were imposed. Bottlenecks emerged when the global economy started up again after the hard lockdown of spring 2020, which caused many companies – ElringKlinger included – to halt production entirely. Besides impacting the general availability of goods and raw materials, these also led to marked price rises and massive delays to deliveries.
Demand for plastic, steel, sheet metal, and wood increased significantly at the start of the pandemic, at a time when capacity was falling and could not be expanded fast enough. Production volumes were down in many places, causing delays right at the start of the value chain. The problem was exacerbated by a shortage of shipping containers hitting world trade.
Ships handle 60% of global goods traffic. Many of these transporters, some true behemoths, load up on goods and raw materials from China and ship them past India, through the Suez Canal, and over the Mediterranean to Europe in the space of 48 days. When only China imposed a strict lockdown at the start of the pandemic, empty containers were not being sent back there. This led to a major container shortage when the Chinese lockdown was lifted, pushing both transportation costs and prices for containers up sharply. In addition to the higher transportation costs and the restrictions on the labor market resulting from the coronavirus, the export ratio of raw materials and industrial goods from China and the US also increased due to the high demand for such items. And there was another relevant factor too: with interest rates being kept persistently low, demand in the construction industry especially was also very strong across the world. This sector needs wood and steel in particular – raw materials that quickly became much more expensive.
Steel is a crucial raw material for the automotive industry, which is one of the steel sector’s biggest customers. In the early days of the coronavirus pandemic, production lines across the world had to be shut down, forcing many steelworks to curb their own production or scale back their capacity, sometimes drastically. The raw materials shortage that this produced was considerable. It was and remains a similar story for other key raw materials such as aluminum or plastic granulates, i.e., pellets, such as PA6.6. The availability of raw materials was disrupted and demand was rising, pushing what were already high prices up even more.