2021 and the scarcity of products and raw materials: causes and outlook

The scarcity of products and raw materials affecting the global economy is apparent in every industrial sector. Although companies have increased production to meet growing demand, supply chains are not able to keep pace with the number of requests received.

This has led to a drastic slow-down in the production of semi-finished goods such as semi-conductors, petrol, plastic materials and chemical products; all essential components in those sectors involving the transport and storage or manufacture of goods.

Causes of the scarcity of products and raw materials

The Covid-19 pandemic has brought many nations to their knees as far as healthcare and the state of the economy are concerned. With the evolving emergency, the fear of shortages (which fortunately have not materialised) has increased, leading people to purchase all kinds of goods compulsively.

This rise in demand has led manufacturers to purchase a greater quantity of raw materials than necessary, to avoid their stocks becoming depleted. However, the supply of these goods has been slowed by international government restrictions, designed to limit the spread of the coronavirus, with the result that such materials have become almost impossible to source.

Copper, iron, steel, corn, coffee, wheat, soy, wood, semi-conductors, plastic and cardboard used for packaging remain difficult to come by on the market. Furthermore, the scarcity of these products has been exacerbated by additional factors and catastrophic events, making the situation even worse. Among the most influential are:

• The Suez Canal incident which delayed delivery of raw materials for several months;
• The drought in Brazil which destroyed many crops:
• The sudden freezing temperatures last February in the United States, which paralysed production in petrochemical plants.

What do economists predict?

While forecasting the evolution of this crisis relating to the scarcity of products and raw materials is complex, it is not at all easy to find an effective solution to the problem either. One might think that it would be sufficient to increase production in order to meet growing demand, but this would only cause further complications.

In order to increase productivity in fact, it is essential to activate strategies focusing on the construction of new systems, recruitment, staff training etc. This requires significant financial investment, which most companies cannot afford, not to mention the amount of time involved.

The same applies to logistics: haulage companies could build new vehicles, such as lorries, ships etc. but even in that case, a great deal of time would be necessary. For example, a goods ship requires about 3 years to be built.

Considering that the likely consequences of the above-mentioned options is an increase in the prices of finished products, price rises are to be expected across many sectors. Economists estimate that this precarious economic situation will continue for most of next year at least and perhaps in years to come.

Monitoring the situation is crucial in order to forecast how the crisis will develop

Some universities have formed collaborations with various US entrepreneurs and logistics directors. The objective is to formulate a reference index to provide as accurate forecasts as possible regarding the evolution of this significant economic crisis.

Constant monitoring of data regarding the stocks present in company warehouses and their cost to companies, as well as information on companies’ capacity to transport goods in the case of logistics firms and the relevant costs is essential to maintain an efficient service.

Translated by Joanne Beckwith