Today’s Pickup: Manufacturing supply chains are nowhere close to normalcy

Manufacturing supply chains are nowhere close to normalcy (Photo: Jim Allen/FreightWaves)

Good day,

The pandemic has shown signs of waning globally over the last week, as several countries across Asia and Europe contemplate ending their lockdowns. The Chinese manufacturing industry is slowly getting back on its feet, as workers return to work. However, this should not be regarded as a move towards normalcy, as that is still a long way ahead.  

Manufacturing supply chains are often very complex. Finished products coming off the production line are put together with parts and raw materials sourced from different parts of the world. Even if China has shown signs of recovery, for its manufacturing supply chain to work seamlessly it would require all the parts manufacturers spread across the globe to be working in tandem. And since about half the world is still under wraps, global manufacturing supply chains will take considerable time to get back to normal conditions post-pandemic. 

Companies looking to diversify their supply chains or move their operations out of China will also have to wait, as the prolonged shutdowns have hit their bottom lines. In essence, manufacturing supply chains have a long wait ahead of them before they inch back to pre-2020 levels of profitability.

Did you know?

The U.S. first-quarter GDP contracted at a seasonally and inflation-adjusted annual rate of 4.8% in the first three months. The decline marks the beginning of a near-certain recession, economists say, and is the biggest drop in quarterly economic output since the fourth quarter of 2008.


“Many malls will now be faced with multiple anchor vacancies, a tough place to come back from, especially in an environment where demand for space is virtually non-existent. This begs many questions. What will a mall redevelopment look like post-COVID? Backfilling with any retail could be tough and most non-retail development now likely doesn’t pencil.”

Vince Tibone, an analyst at Green Street Advisors, commenting on the possibility of department stores in malls closing down due to the pandemic.

In other news

Chinese oil giant CNOOC cuts U.S. shale, Canada oil sands output

CNOOC announced that it would lower its planned capex and production guidance for 2020, as “proactive measures to face the challenges” of the turbulent oil market. (Oilprice)

Companies won’t move their supply chains out of China, says Morgan Stanley

Cash-starved companies currently lack the funds to invest in new operations and tinker with existing supply chains. (MarketWatch)

Lyft lays off almost 1,000 staffers as Uber weighs big layoffs

A report says Uber’s ride bookings have fallen 80% from a year earlier. (ARS Technica)

Global air cargo industry facing ‘immediate and severe’ capacity crunch, IATA says

The industry body called for a uniform set of measures to help restart global air travel. (The National)

FCA pushes back reopening of Toledo factories

FCA had planned to resume production at Toledo on May 4, but the company announced that it was re-evaluating its restart timing and would communicate details at a later date. (Toledo Blade)

Final thoughts

As the global oil price meltdown continues to rock the fundamentals of U.S. oil producers, 28 Saudi Arabian oil tankers are on their way to the U.S. Gulf and West coasts. The tankers include 14 VLCCs and carry a total of 43 million barrels of oil, and would join a rather long queue of 76 oil tankers that are already waiting to be unloaded at U.S. ports. 

This will be a heavy blow to the struggling U.S. oil producers, as U.S. refinery demand for crude has fallen by over 3 million barrels per day (b/d), while oil production has only dropped by 800,000 b/d. Energy intelligence company Rystad Energy has estimated that oil production will drop by another 800,000 b/d in the following weeks. However, crude imports are expected to remain steady at around 5.8 million b/d during May due to the incoming Saudi tankers.

Hammer down everyone!