The floods in China and Europe are another “body blow” for global supply chains, the CEO of a shipping company told CNBC on Monday.
“Seldom goes a week without something new,” says Tim Huxley, CEO of Mandarin Shipping.
Shipping has already experienced massive disruptions this year. As parts of the world recovered from the pandemic, increased spending resulted in a shortage of containers, causing delays and driving up prices.
In April one of the largest container ships in the world got wedged in the Suez Canal and stopped traffic for almost a week. The waterway is one of the busiest in the world, carrying about 12% of all trade.
In June, a spike in COVID cases in southern China caused further delays in the region’s ports, pushing shipping prices soaring again.
“Broken railway connections” due to floods in Europe
Heavy rains and floods have devastated parts of Western Europe. Some of the worst floods occurred in Germany and Belgium. Parts of Switzerland, Luxembourg and the Netherlands are also affected.
“This will really disrupt the supply chain because the rail links have all been cut,” Huxley told CNBC’s Squawk Box Asia.
These include railways from the Czech Republic and Slovakia to the German ports of Rotterdam and Hamburg, which are “seriously disrupted”.
“And that will delay freight movements back and forth,” he said. “This is going to really mess up the industry.”
Huxley pointed to Thyssenkrupp and stated that the German steel giant could not get any raw materials because of the flooding.
“That will ultimately affect industries like automotive, home appliances and the like,” he said.
S&P Global Platts reported, citing a customer letter, that Thyssenkrupp had declared force majeure on July 16. A force majeure event occurs when unforeseeable circumstances, such as natural disasters, prevent a party from fulfilling its contractual obligations and release it from sanctions.
A source at the company’s plants told S&P Global Platts that parts of the railroad in Hagen were “missing”, adding that it was even more difficult than before to get trucks for delivery. Hagen is a city in western Germany that has been hardest hit by the floods.
Floods in inland Henan cut the supply of wheat and coal
The disruption caused by the floods in China’s Henan Province, meanwhile, is made worse by the province’s being inland, Huxley said.
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The interruption of the railway will again have “great effects”, he said.
“Of course that will affect the shipping, that will increase the shipping costs,” said Huxley.
The distribution of wheat and coal is affected, said Huxley, who pointed out that Henan is China’s “bread basket” and has produced 38 million tons of wheat this summer.
