Tuesday 14th July 2020

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Robust or bust

Will supply chain challenges culminate in a long-overdue crisis?

by Greg Klein | May 7, 2020

It might take premature complacency or enormously good fortune to look back and laugh at the Early 2020 Toilet Paper Panic. But from today’s viewpoint, bumwad might be the least of our worries. There won’t be much need for the stuff without enough food to sustain life. Or water. Medicine, heat and electricity come in handy too.

Sparsely stocked supermarket shelves have been blamed on hoarders who thwart the industry’s just-in-time system, a process credited with “robust” reliability when not challenged by irrational buying sprees. Consumer concern, on the other hand, might be understandable given the credibility of official positions such as Ottawa’s facemask flip-flop and initial arguments that closing borders would actually worsen the pandemic.

Will supply chain challenges culminate in a long-overdue crisis?

A North Vancouver supermarket seen in mid-March. While
stockpiling has abated, supply lines show signs of stress.
(Photo: Steeve Raye/Shutterstock.com)

Meanwhile Canadian farmers worry about the supply of foreign labour needed to harvest crops, dairy farmers dump milk for lack of short-distance transport and deadly coronavirus outbreaks force widespread closures of meat and poultry plants across Canada and the U.S.

Highlighting the latter problem were full-page ads in American newspapers from meat-packing giant Tyson Foods. “The food supply chain is breaking,” the company warned in late April. “Millions of animals—chickens, pigs and cattle—will be depopulated because of the closure of our processing facilities.”

Within days the U.S. invoked the Defense Production Act, ordering meat plants to stay open despite fears of additional outbreaks. 

Just a few other pandemic-related food challenges in Canada include outbreaks at retail grocers, a shortage of packaging for a popular brand of flour and an Ontario supermarket warning customers to throw away bread in case it was tainted by an infected bakery worker.

Infrastructure supplying necessities like energy, fuel, water and communications faces pandemic-related challenges of its own, including availability of labour and expertise.

Supply chain complexity has been scrutinized in The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age. One example from author David S. Abraham was the electric toothbrush, a utensil comprising something like 35 metals that are sourced, refined and used in manufacturing over six continents.

Dissecting a 2017 smartphone, the U.S. Geological Survey found 14 necessary but mostly obscure elements. As a source country, China led the world with nine mineral commodities essential to mobile devices, and that list included rare earths in a single category.

In a recent series of COVID-19 reports on the lithium-ion necessities graphite, cobalt, lithium and nickel, Benchmark Mineral Intelligence stated: “From the raw material foundations of the supply chain in the DRC, Australia, Chile and beyond, through to the battery cell production in China, Japan and Korea, it is likely that the cells used by the Teslas of the world have touched every continent (sometimes multiple times over) before they reach the Model 3 that is driven (or drives itself) off the showroom floor.”

Will supply chain challenges culminate in a long-overdue crisis?

Consumers might not realize the complex
international networks behind staple items.

Or consider something more prosaic—canned tuna.

That favourite of food hoarders might be caught in the mid-Pacific, processed and canned in Thailand following extraction of bauxite (considered a critical mineral in the U.S.) in Australia, China, Guinea or elsewhere, with ore shipped for smelting to places where electricity’s cheap (China accounted for over 56% of global aluminum production last year). Then the aluminum moves on to can manufacturers, and transportation has to be provided between each point and onward to warehouses, retailers and consumers. Additional supply chains provide additional manufactured parts, infrastructure, energy and labour to make each of those processes work.

Still another supply chain produces the can opener.

Daily briefings by Canada’s federal and provincial health czars express hope that this country might “flatten the curve,” a still-unattained goal that would hardly end the pandemic when and if it’s achieved. Meanwhile the virus gains momentum in poorer, more populous and more vulnerable parts of the world and threatens a second, more deadly wave coinciding with flu season.

And if one crisis can trigger another, social order might also be at risk. Canada’s pre-virus blockades demonstrated this country’s powerlessness against a force not of nature but of self-indulgence. Even a cohesive, competent society would have trouble surviving a general infrastructure collapse, a scenario dramatized in William R. Forstchen’s novel One Second After. When transportation, communications, infrastructure and the financial system break down, so do a lot of people. Dangerous enough as individuals, they can form mobs, gangs and cartels.

How seriously Washington considers apocalyptic scenarios isn’t known. But prior to the pandemic, the U.S. had already been taking measures to reduce its dependency on China and other risky sources for critical minerals. Now, Reuters reports, COVID-19 has broadened American concerns to include other supply chains and inspired plans for an Economic Prosperity Network with allied countries. Questions remain about the extent that the West can achieve self-sufficiency and, in the U.S., whether another administration might undo the current president’s efforts.

Certainly globalist confidence persists. The Conference Board of Canada, for example, expects a slow return of supply chain operations to pre-pandemic levels but a renewed international order just the same. “Global co-operation is needed not only to tackle the health crisis, but also to restore trust in global supply chains and maintain the benefits that the growth in global trade has brought over the last two decades.”

Will supply chain challenges culminate in a long-overdue crisis?

New cars leave the manufacturing hub and disease
epicentre of Wuhan prior to the pandemic.
(Photo: humphery/Shutterstock.com)

One early COVID-19 casualty, the multi-continent diamond supply chain, already shows signs of gradual recovery according to Rapaport News. Despite mine suspensions, “there is more than enough rough and polished in the pipeline to satisfy demand as trading centres start to reopen. Belgium and Israel have eased lockdown restrictions, while India has allowed select manufacturing in Surat and special shipments to Hong Kong.”

Also struggling back to its feet is global automotive manufacturing. Writing in Metal Bulletin, Andrea Hotter outlines how the disease epicentre of Wuhan plays a vital role in making cars and supplying components to other factory centres. “If ever there was a masterclass in the need to disaster-proof a supply chain, then the COVID-19 pandemic has provided a harsh reminder to the automotive sector that it’s failing.”

So regardless of whether apocalyptic fears are overblown, there are lessons to be learned. As Benchmark points out, COVID-19 has disrupted “almost every global supply chain to such a profound extent that mechanisms for material sourcing, trade and distribution will likely never be the same again.”

In the meantime, a spare can opener or two might be prudent. Or maybe several, in case they become more valuable than bullion.


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