Disruption #17: Shipping Problems Worsen, Chinese Factories Close to Preserve the Power Grid, and Inflation Continues.

“I am tearing my hair out every day trying to get my orders out of China.”

Quote from Sales Representative

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HASBRO AND QVC AMONG THOSE WITH LATE SHIPMENTS OUT OF YANTIAN

According to a Freightwaves article by Lori Ann LaRocco, “Viewpoint: Yantian might be ‘worse than the Suez blockage,” things are getting worse at the covid-stricken port of Yantian in China. So many workers are sick that the port has been running at 30% capacity. As the article puts it:

Another day, another increase in delay. This means there is no significant increase of people working at the port to speed the process up. It also shows the significant magnitude of the lockdowns in the surrounding area. There are currently 27 cargo vessels at anchor at Yantian.

As I noted in Disruption Report #16, the port of Yantian is critical to the toy industry as it is part of a triangle with Shenzhen and Hong Kong. So, we should not be surprised when Ms. LaRocco writes:

The largest-named consignee is TV maker TTE Technologies. Other big brands of note are Tesla, Williams-Sonoma, QVC, JoAnn Fabrics and Hasbro.

INFLATION CONCERNS CONTINUE

Consumer prices rose in May at the fastest rate since 2008, a bigger jump than economists had expected and one that is sure to keep inflation at the center of political and economic debate in Washington

The above quote is from from a New York Times article by Jenna Smialek, “Prices Jumped 5% in May From Year Earlier, Stoking Debate in Washington.” Ms. Smialek considers whether the recent increase in prices will fade away once supply catches up with demand, or whether we are looking at a more fundamental change.

From what I am reading, most analysts think inflation will subside in the coming months. I am not so sure. Things are not getting any better in the supply chain. Until that gets back to normal, shortages will rule, which means price increases. Consider this quote from a Wall Street Journal article, “The Global Logistics Logjam Shifts to Shenzhen From Suez:”

China and the U.S. this week recorded their biggest annual jumps in factory-gate prices and consumer prices, respectively, in more than a decade. If such problems continue—and get worse—they could weigh on global growth.

ELECTRICITY DEMANDS IN GUANGDONG CHINA FORCE FACTORIES TO SUSPEND OPERATIONS

It’s hot in southern China. That heat coupled with factories running at total capacity is straining the power grid. As a result, factories have been asked to stop operating for hours and, in some cases, days. That does not help a toy industry and a world trying to meet the constant increase in demand for consumer products.

Southern China is where most of the world’s toys are made. The electricity-caused shutdowns plus the continuing Covid-related problems at the port of Yantian are playing havoc with toy supplies.

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