Shipping, supply chain crunch could drag into 2022 as world economy awaits Delta variant shock

China’s determination to stamp out the coronavirus has meant even a small number of cases can cause major disruptions to trade

Freight rates are being pushed to record highs, prompting some exporters to raise prices or simply cancel shipments altogether

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China’s determination to stamp out the coronavirus has meant even a small number of cases can cause major disruptions to trade. Photo: Xinhua)

Published: 3:00pm, 26 Aug 2021

A supply chain crunch that was meant to be temporary now looks like lasting well into next year as the surging Delta variant upends factory production in Asia and disrupts shipping, posing more shocks to the world economy.

Manufacturers reeling from shortages of key components and higher raw material and energy costs are being forced into bidding wars to get space on vessels, pushing freight rates to records and prompting some exporters to raise prices or simply cancel shipments altogether.

“We can’t get enough components, we can’t get containers, costs have been driven up tremendously,” said Christopher Tse, chief executive officer of Hong Kong-based Musical Electronics, which makes consumer products from Bluetooth speakers to Rubik’s Cubes.

Tse said the cost of magnets used in the puzzle toy have risen by about 50 per cent since March, increasing the production cost by about 7 per cent.

If the pandemic cannot be effectively contained, port congestion may become a new normal.

Hsieh Huey-chuan

“I don’t know if we can make money from Rubik’s Cubes because prices keep changing,” he said.

China’s determination to stamp out the coronavirus has meant even a small number of cases can cause major disruptions to trade.