The impact of COVID-19 on Supply Chain Management
The COVID-19 pandemic has had a disrupting impact on businesses around the world and the global raw material markets are facing many turbulences.
Most markets and countries have been limited in economic activitities due to restrictions and lockdown measurements.
In the past year, the spread of COVID-19 has disrupted supply chains globally in different ways:
- Weakening demand for some companies
- Skyrocketing demand for select companies
- Creating uncertainty in obtaining raw materials
- Impacting the ability to ship and receive products on time due to shortages and logistics bottlenecks
- Ensuring workforce capacity to assemble and ship products
As of the beginning of March 2021 the Brent Crude Oil is already on the level of $63 with a potential to $65 per barrel by summer 2021 (source: Goldman Sachs). Respectively this means a price adjustment of 20% compared to January 2021. Carbon Black formula prices – based on LSFO 1% – follow this trend, therefore the expected post-covid market recovery is being accompanied by significant increases in carbon black prices.
Logistics additionally remain a challenging aspect, due to the critical shortage of containers, specifically coming from Asia but also from other parts of the world. In December spot freight rates were even 250% higher for the Asia to Europe route. Lockdowns and limitations/restrictions disturbed logistics and productions and as a consequence causes a paradox situation that there are about 180 mln containers worldwide, but not in the required places.
With learnings from the outbreak, the supply chain operations will have to move towards a more comprehensive proactive modeling. Companies should review their supply chain strategy more deeply and in each dimension and forecast demands in close collaboration with the supplier.
With all the challeging aspects, PentaCarbon GmbH is looking forward extending successful partnerships with its’ customers.
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