Kiel Institute in the News

Global Supply Lines Brace for ‘Menacing’ Economic Storm to Widen

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…"We thought Russia was just a resources story that was going to push energy prices up - that it would make supply chains more expensive but it wouldn''t disrupt them," said Vincent Stamer, a trade economist with Germany''s Kiel Institute for the World Economy. "It appears a little more threatening than we initially anticipated."

On top of the wartime setbacks, omicron outbreaks are widening China''s use of strict lockdowns in major trade hubs, the latest in Shanghai. A.P. Moller-Maersk A/S, the world''s No. 2 container carrier, said Monday that some depots serving local ports have closed indefinitely, and trucking to and from terminals will be "severely impacted."

Chinese exports were already tailing off from an October peak - a trend that might continue for the next few months if Beijing maintains the hard line on fighting the virus, Stamer said. That''ll add shipping delays, sourcing problems and costs for businesses from the U.S. to Europe. According to supply constraint indexes developed by Bloomberg Economics, pressures in the U.S. and Europe intensified in February after several months of improvement. Anecdotal evidence through March suggests the strains won''t abate. Stamer cited the example of electric wire assemblies made in Ukraine for German automakers. "These cable trees are actually custom-made for individual cars" and aren''t easily or cheaply sourced from other countries, he said. Another rare input that''s suddenly even more scarce is neon gas used in semiconductor production. Ukraine produces 50% of the world''s purified neon, Stamer said. Russia''s output of raw materials extends even deeper into the global economy…

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Kiel Institute Expert