Ukraine conflict adds to European supply chain snags

Clas Ohlson AB

09/03/2022 15:41

* Asia-Europe route snagged by air and sea
    * Auto makers particularly badly hit
    * Ukrainian truck drivers returning home to fight

    By Rene Wagner and Nadine Schimroszik
    BERLIN, March 9 (Reuters) - European companies are suffering
yet more strain on supply chains already snarled up by the
coronavirus pandemic as the conflict in Ukraine leads to growing
shortages of key components, they warned on Wednesday.
    The new snags pose a further threat to economic recovery in
Europe, potentially prolonging existing bottlenecks that in some
sectors were not expected to clear until next year.  urn:newsml:reuters.com:*:nL8N2UM3WS
    The conflict has added to the trade chaos that followed the
global economy's emergence from pandemic lockdowns. Asia-Europe
routes have been worst hit by issues including acute port
congestion and cargo disruption due to the closure of Russian
airspace, a JPMorgan analysis showed.
    In the region's largest economy, German carmakers Porsche,
Volkswagen and BMW and truckmaker MAN have all curtailed output
due to a lack of supplies from the crisis region.  VOWG_p.DE 
 BMWG.DE   8TRA.DE 
    Russia's invasion has forced the shuttering of Ukrainian
suppliers of wire harnesses - a vital set of parts which bundle
up to 5 kilometres (3.1 miles) of cables in the average car.
Unique to each car model, vehicles cannot be built without them.
    On Wednesday German auto parts-maker Continental said it too
was working to shift production from a Russian plant where
operations were suspended.  MICP.PA   CONG.DE . 
    "In the event the geopolitical situation, in particular in
Eastern Europe, remains tense or even worsens, it can result in
lasting consequences for production, supply chains and demand,"
the group said.
    Volkswagen's luxury division Porsche has suspended
production of its electric Taycan model at the group's
Stuttgart-Zuffenhausen plant until the end of next week, the
company said, citing a lack of components. That meant about 200
Taycan cars a day cannot be built, it said. 
    French tyre-maker Michelin also said last week it would
temporarily halt production at some of its plants in Europe due
to logistical issues. 
    In the Czech Republic, which has built an industry around
supporting western Europe's car majors, over a fifth of auto
sector companies are having to solve logistics problems caused
by the conflict such as a lack of components, industry body
AutoSAP said.  urn:newsml:reuters.com:*:nL5N2VC2DM
    The conflict's impact on shipping, rail and air freight has
been compounding problems in the European auto supply chain at a
time when inventory levels were already low and carmakers were
still reeling from a chip shortage and soaring energy prices.
    As well as high-grade nickel, the price of metals used in
car production, from aluminium in bodywork to palladium in
catalytic converters, has also soared since the invasion.
 urn:newsml:reuters.com:*:nL2N2VB0JU
    
    TRUCK DRIVERS RETURN TO FIGHT
    With its complex supply chains, Europe's car industry may be
particularly exposed to disruption. But the impact is already
being felt much more widely.
    German ball bearings maker Schaeffler  SHA_p.DE , which
sources some of its steel from Russia, said this week it could
not provide an outlook for the year due to the war in Ukraine.
    Releasing its latest results, Sweden-based hardware store
chain Clas Ohlson  CLASb.ST  said it faced shortages in certain
product categories and that the war could lead to further
uncertainty in supply chains.
    Nearly a third of 200 German companies surveyed by the IW
think tank said they foresee problems with a lack of supplies -
a figure which rose to nearly 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," rating agency Scope
said as it cut its 2022 growth forecast for the German economy
to 3.5% from 4.4%.
    Both Germany's Federal Association of Road Haulage,
Logistics and Disposal (BGL) group and Deutsche Post DHL
 DPWGn.DE  warned that the conflict was creating local shortages
of drivers, many of whom are Ukrainian and had returned home.
    According to BGL, at least 7% of truck drivers in Germany
are from Ukraine. Association chief Dirk Engelhardt said many of
them are likely to have gone home to join the fight against
Russia.
    Deutsche Post DHL Chief Executive Frank Appel said it was
not clear yet how many were returning to Ukraine. "We worry
about whether those that go will return healthy," he said. 

 (Additional reporting by Maria Sheahan and Victoria Waldersee
in Berlin, Josephine Mason and Paul Sandle in London; Writing by
Mark John; Editing by Jan Harvey)
 ((london.newsroom@reuters.com; +44 207 542 5816; Reuters
Messaging: mark.john.thomsonreuters.com@reuters.net))