You don’t need to be an expert in supply chain risk to recognise the extent of current shortages. Until recently, consumers could rely on a steady rate of inflation, stable pricing and an ability to order products without having to think about lead times or the vast network of services that allow them to arrive on their doorstep in good time. Businesses also enjoyed a relatively predictable market, with commodities that were both affordable and readily available.
But that’s now changed. Several competing issues are creating a level of scarcity that’s rarely been seen since ‘supply chain management’ was coined in early 1980s – and the disruption can only be expected to continue as the legacy of those challenges begin to make their mark.
Our latest Supply Chain Resilience Index report paints a stark picture. In Q4 of 2021, supply chain resilience dropped to a score of 44.9, which is only marginally above the 40% ‘high-risk’ threshold. Prices also rose by 12% compared to the previous three months. These figures have worsened since Russia invaded Ukraine in February.
Worryingly, many of the bottlenecks have a direct impact on downstream markets. This blog provides a forecast of most significant materials shortages – particularly ones that pose the greatest threat to growth in increasingly uncertain conditions.
Tin
Tin is a relatively small market but is currently experiencing one of the longest-running squeezes. Prices peaked at $39,150 per tonne in November last year and have been similarly bullish in 2022. Demand from the electronics industry has mainly fuelled the spike, where it’s used for soldering printed circuit boards (PCBs). Low metal output has also contributed to current shortages.
Molybdenum
Much like tin, Molybdenum has also been subject to rapidly rising prices, hitting a peak of $45 per keg in October 2021. It’s mined mostly as a by-product of other metals and used as an alloy. China has bought up a huge portion of the world’s supply for its major infrastructure projects, where it can be used to make steel stronger and more resistant to corrosion.
Lithium
Surging electric vehicle demand and the energy transition are fuelling mass speculation for lithium. The silvery metal’s price has rocketed, with China purchasing much of the active projects worldwide. Demand continues to outstrip supply as new mines are slowly brought online.
Oil and Gas
Perhaps the most visible shortages, crude oil and natural gas have both surged in price during Q4 and continued to in 2022. The invasion of Ukraine has only fuelled further instability, with many countries attempting to divert their supply away from Russia – the world’s second-largest producer – as part of a package of sanctions.
Lumber
Traditionally a bellwether commodity, lumber has followed similar trends seen in the metals market. There were signs the situation was easing, though an all-time high of $1,686 per thousand feet of board was reached in March 2022 – an increase of 406% compared to a year earlier. Tariffs, adverse conditions and poor logistics have all contributed.
Nickel
Nickel is essential for stainless steel and is also used in electric vehicle production. Prices, however, exceeded $100,000 per tonne for the first time in March – mostly as a result of the Ukraine conflict. This represents a jump of $72,000 since the end of 2021. Despite Russia being the third-largest producer, slower construction output in China may offset some of the demand.
Zinc
Zinc prices in Europe continued to rise steadily in 2021 amid tight supply. Chinese and US markets were also flat, with only limited spot activity. Low inventories and the prohibitive cost of energy have been blamed for a lack of refined product, leaving many businesses without a key material for making alloys.
Wheat
Ukraine is known as the ‘breadbasket of Europe’ owing to its vast fields of dark, rich soil that are responsible for a significant portion of the world’s wheat. The recent invasion has naturally raised concerns for global food security, not least because other key producers have also forecast a shortfall. High fuel and fertiliser costs have deterred farmers from planting despite prices soaring.
If you’re concerned about the impact of current commodity shortages on your business, get in touch to talk with our team of experts.
