Yet another logistic nightmare in China
This post is for housekeeping purposes only & will not be sent via e-mail. The original thread was written on March 13th.
Since then the situation deteriorated quickly in China as shown here:
Ship at berth in the shanghai area:
Here’s a map of cases & potential lockdowns
Which is highly concentrated around the industrial centres.
SHENZHEN LOCKING DOWN 17M HABITANTS shows, once more, that there's not going to be a supply chain normalization soon. This could take years or decades.
Shenzhen is the 4th largest port in the world. There are high chances that this will create disruptions. Shanghai has also displayed a growing number of cases & could be next in line for a lockdown. Guangzhou is very close to SZ & I would bet on rapid cases growth there.
I already warned about the impact of HK locking down.
#HK is an important logistic centre, the 8th biggest port and 1st air cargo airport.
In addition, Shenzhen & the entire Greater Bay Area (Google it) is a very significant region of industrial production. The GDP of Shenzhen is equal to a country of the size of Belgium or Sweden. The GBA GDP is equivalent to Canada / Brazil.
For example. Luxshare who's making the Airpods has its HQ in Shenzen. As does Foxconn, a major supplier for the iPhones. It's not really rocket science to understand that it will be impactful. Here's $AAPL (not super uptodate) iPhone supply chain map:
The promised supply chain resilience doesn’t seem to be happening so far. It shows up quite well in the USA trade balance (the difference between the monetary value of a nation's exports and imports over a certain time period). It is in a parabolic decline.
This is partially explained by the cost differential. I will use PPI as a proxy. Here's the differential between the US & CN <0 means it's getting cheaper to get stuff made in CN than US (sorry no index on that series)
So basically, the higher the inflation in the US, the more the US co's have an interest in producing abroad. The more the US is reliant on offshore supply chain. There's no sign of slowing down as inflation & higher wages growth in the US will feed this self-reinforcing monster.
We can already see that container exits were collapsing prior to this. An additional supply shock is probably coming.
