Adapting to Trends in the Global Supply Chain
By Bill Geary | May 13, 2021
Read Time: 4 Minutes
The COVID-19 pandemic impacted global supply chains significantly in 2020. One year later, the macroeconomy is bouncing back, vaccines are on the rise, and businesses are starting to reopen. However, the rebound is not without its pressures on suppliers.
To keep up with the return to normal, manufacturing is ramping up quickly, which means higher volumes of commodities are needed to create the products many businesses are waiting for. Yet, recent disruptions, such as the significant flooding in Australia and winter storms in Texas and Louisiana in February, are squeezing suppliers across industries. But this won’t last forever.
Let’s look at five critical materials experiencing supply chain strain and how partnering with WESCO and Anixter can help you stay ahead of these trends.
Five materials with strained market dynamics
1. Packaging materials and lumber
The industrial and retail recovery of COVID-19 is spurring demand for packaging, lumber and other consumable products. Lumber and plywood prices are up 49.6% year-over-year through January, according to the U.S. Bureau of Labors Statistics’ (BLS) Producer Price Index (PPI) for construction materials. And it’s still growing, despite constricted supply and increased costs.
With COVID-inspired online shopping demand, consumer spending changes, and consistently rising need for PPE, medical consumables, consumer product packaging and home improvement equipment, this raw material squeeze is expected to put pressure on manufacturers for some time.
2. Metals (steel, aluminum and copper)
Steel prices are continuing their upward trajectory in 2021 as demand grows faster than what is available. Hot-rolled steel hit a 13-year high in February 2021, according to Reuters, at $1,176 per ton. Similarly, copper and aluminum prices are on the rise. Since the third quarter of 2020, the cost of copper increased 29% according to the Nasdaq, whereas the price of aluminum reached a three-year high of $2,050 per ton in February 2021.
What’s driving interest? Apart from the global recovery, section 232 tariffs on steel and aluminum, increased freight costs, energy sustainability and electric vehicle growth have significantly impacted the steel, copper and aluminum uptick.
3. Plastic resins
In March 2021, Plastics Today reported that 80-85% of domestic resin production was impacted following the storms in Texas and Louisiana. At least six resin suppliers were experiencing force majeure conditions as of February 2021. These compounded events placed significant pressure on the plastic resin suppliers, despite rising need in all relevant sectors.
From the outset of COVID-19, domestic and international freight travel changed considerably. Domestically, there is a higher emphasis on the significant parcel and last-mile delivery contracts. However, port and hub congestion delays, imbalanced supply and demand, and south-central weather events have impacted domestic freight delivery.
Internationally, reduced transit routes, port congestion and spot market escalations have affected industries across the globe. Airfreight is balancing fewer transoceanic flights and customs inspection delays, while shipping is grappling with port congestion and reduced sailings due to low demand from Asia, according to the Freightos Baltic Index.
5. Semiconductor chips
Semiconductor shortages are affecting everything from electronics, medical devices, auto manufacturing, and networking – and each industry is impacted differently. Given the global pandemic, auto manufacturers reduced their chip orders while demand for chips used in laptops and data centers increased. The passenger vehicle rebound in the third quarter of 2020 also prompted a renewed increase in demand. Additionally, the supply chain shortage affected computing and electronic manufacturing facilities with national shelter-in-place and lockdown protocols.
In 2021, businesses are focused on their recoveries. Yet, with limited supply for significantly growing demand, it can be challenging to navigate these market dynamics without a supportive industry partner with a global market presence.
Withstand volatility by partnering with a global supply chain solutions leader
In the face of current supply chain volatility, WESCO and Anixter are positioned to provide industry-leading products and solutions from world-class suppliers. Collectively, WESCO and Anixter have access to almost 1.5 million products and held approximately $2 billion in inventory as of March 31.
As a combined company, we can offer you MORE+ products, services, solutions and expertise to enable your competitive advantage. With our broad portfolio and extensive buying power, we’re able to work with our suppliers to stay ahead of these emerging supply chain issues.
Offering MORE+ communications and security solutions, we provide data center and smart city expertise to help businesses stay secure, maintain flexibility, and boost efficiency. Learn more about our Communications and Security Solutions.
ABOUT THE AUTHOR
Bill became Wesco's Executive Vice President and General Manager – Communications & Security Solutions in July 2020, following Anixter’s merger with Wesco. Prior to this, he served as executive vice president of the Network & Security Solutions segment for Anixter since July 2017.