Conflict in Ukraine adds to European supply chain challenges

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  • An Asia-Europe route hooked by the air and the sea
  • Car manufacturers particularly affected
  • Ukrainian truckers go home to fight

BERLIN, March 9 (Reuters) – European companies are coming under increasing pressure on supply chains already strained by the coronavirus pandemic, as conflict in Ukraine leads to growing shortages of key components, officials said. they warned on Wednesday.

The new problems pose an additional threat to economic recovery in Europe, potentially prolonging existing bottlenecks which, in some sectors, were not expected to be cleared until next year. Read more

The conflict has added to the trade chaos that has followed the emergence of the global economy from the pandemic shutdowns. Asia-Europe routes have been hardest hit by issues such as acute port congestion and cargo disruptions due to the closure of Russian airspace, according to analysis by JPMorgan.

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In the region’s biggest economy, German automakers Porsche, Volkswagen and BMW and truck maker MAN have all cut production due to a lack of supplies from the crisis region. (VOWG_p.DE), ,

Russia’s invasion forced the shutdown of Ukrainian suppliers of wiring harnesses – a vital set of parts that bundle up to 5 kilometers (3.1 miles) of cables into an average car. Unique to each car model, vehicles cannot be built without them.

On Wednesday, German auto parts maker Continental said it was also working to transfer production from a Russian plant where operations were suspended. (MICP.PA), (CONG.DE).

“If the geopolitical situation, particularly in Eastern Europe, remains tense or even worsens, this could have lasting consequences for production, supply chains and demand,” the group said. .

Volkswagen’s luxury division, Porsche, has suspended production of its Taycan electric model at the group’s factory in Stuttgart-Zuffenhausen until the end of next week, the company said, citing a shortage of components. This meant around 200 Taycan cars a day could not be built, he said.

French manufacturer Michelin also announced last week that it would temporarily halt production at some of its factories in Europe due to logistical problems.

In the Czech Republic, which has built an industry around supporting Western European car majors, more than a fifth of car companies are having to deal with logistical problems caused by the conflict, such as a lack of components, said the industry body AutoSAP.

The conflict’s impact on sea, rail and air freight has compounded problems in Europe’s automotive supply chain at a time when inventory levels were already low and automakers were still reeling from a shortage chips and soaring energy prices.

Besides high-grade nickel, the price of metals used in automobile production, from aluminum in bodywork to palladium in catalytic converters, has also skyrocketed since the invasion. Read more

TRUCK DRIVERS RETURN TO COMBAT

With its complex supply chains, the European automotive industry may be particularly exposed to disruption. But the impact is already being felt much more widely.

German ball bearing maker Schaeffler (SHA_p.DE), which sources steel from Russia, said this week it could not provide a full-year outlook due to the war in Ukraine.

Reporting its latest results, Swedish hardware chain Clas Ohlson (CLASb.ST) said it was facing shortages in some product categories and the war could lead to further uncertainty in supply chains.

Almost a third of the 200 German companies surveyed by think tank IW said they foresee problems with lack of supply – a figure that rises to almost 40% for industrial companies.

Germany‘s growth outlook is deteriorating as the impact of the Russia-Ukraine conflict exacerbates existing supply chain disruptions and inflationary pressures,” ratings agency Scope said as it cut its ratings. 2022 growth forecast for the German economy at 3.5% versus 4.4%.

Germany’s Federal Association for Road Transport, Logistics and Disposal (BGL) group and Deutsche Post DHL have warned the dispute is creating a local shortage of drivers, many of whom are Ukrainians and have returned home.

According to BGL, at least 7% of truck drivers in Germany come from Ukraine. The head of the association, Dirk Engelhardt, said that many of them would probably have returned home to join the fight against Russia.

Deutsche Post DHL managing director Frank Appel said it was not yet clear how many were returning to Ukraine. “We worry about whether those who leave will come back healthy,” he said.

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Additional reporting by Maria Sheahan and Victoria Waldersee in Berlin, Josephine Mason and Paul Sandle in London; Written by Mark John; Editing by Jan Harvey

Our standards: The Thomson Reuters Trust Principles.

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