Skilled trades see bottlenecks as “economic killers”

Berlin The Federation of German Industries (BDI) has called on the EU to act in view of the scarcity of raw materials. “With a view to strengthening its strategic sovereignty, the EU is required to deal quickly with delivery bottlenecks and capacity building,” said Wolfgang Niedermark, member of the BDI management board, the Handelsblatt.

The corona pandemic and the current low transport capacities led to high additional costs for transport by sea, rising raw material prices and considerable delivery delays. “That causes disruptions in the production processes.”

For various raw materials, Europe is “dangerously dependent” on individual suppliers or delivery areas, said Niedermark. The same applies to the manufacture of semiconductors. “Because of the importance of semiconductors for industry, Europe must regain lost skills and capacities with government support,” warned the BDI expert. Especially since the risk of supply bottlenecks is real. Digitization, the energy transition and electromobility would continue to drive the demand for raw materials for future technologies.

The trade was also alarmed. The price explosion with simultaneous massive supply bottlenecks for many building materials are a “burden for the craft as well as the economy as a whole”, said the general secretary of the Central Association of German Crafts (ZDH), Holger Schwannecke, the Handelsblatt.

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If the situation does not relax quickly, the economy in the construction and finishing trades will also deteriorate, as will the industrial suppliers, which have only just slowly recovered.

Bottlenecks, especially in timber

“So far, the building and finishing trades in particular have carried the craft through the pandemic and acted as a stabilizer for the economy,” emphasized Schwannecke. “Politicians are therefore called upon to use all the instruments at their disposal so that the upheavals on the building materials market do not become economic killers.”

The craft’s warning is no coincidence. There have recently been delivery bottlenecks and sharp price increases, especially for construction timber. Cost increases of up to 300 percent year-on-year are not uncommon, it was recently said from the carpentry industry. But other industries are also suffering from bottlenecks in the supply of raw materials, as a study by the Institut der Deutschen Wirtschaft (IW) shows.

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From the researchers’ point of view, the shortages could jeopardize a rapid economic upturn after the corona crisis. “Especially with the renewed entry into social and economic normalization as a result of the vaccination progress and the resulting discharge of pent-up consumption, these bottlenecks are holding back the economic recovery momentum,” says the paper that is available to the Handelsblatt.

In order to determine the burden on the German economy caused by delivery bottlenecks in goods such as timber or computer chips, the IW carried out a quick survey of 23 business associations concerned. The survey took place between May 3 and May 11, 2021.

SPD Minister for EU export ban on raw materials

Accordingly, a good 40 percent of the industry associations surveyed currently see strong short-term risks from domestic supply bottlenecks. This applies, for example, to the automotive and plastics industry, the textile and leather industry, the construction industry or painters and varnishers. Another third of the associations, such as the machine and system builders, registered a moderate restriction. This is only marginally different for foreign advance payments.

The outlook for the coming months is rated somewhat better, but according to IW, there is no reason to give the all-clear. “Many bottlenecks will disappear in the next few months, but some problem cases will last longer,” said Hubertus Bardt, author of the study and managing director of the IW, the Handelsblatt. “Missing semiconductors in particular can lead to production downtimes in a wide variety of industries for even longer.”

Bardt sees “not much” room for maneuver in politics. “Above all, it must keep the borders for the movement of goods open so that the bottlenecks can be resolved as quickly as possible.” The IW is critical of the export restrictions brought into play by several SPD state economics ministers. A “direct intervention in the purchasing policy of the company” should not be derived from the scarcity of raw materials in the EU. “This is corporate responsibility.”

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The BDI also rejects an export ban. “We learned again during the pandemic: Export restrictions are counterproductive,” said BDI expert Niedermark. “They tempt other countries to take countermeasures from which Germany, as a trading and industrial nation in particular, would suffer.”

Niedermark pointed out that it is in their own interest for companies to diversify their supply chains and develop alternative procurement channels. “Strengthening the circular economy, expanding domestic subsidies and tax incentives for storing critical raw materials are important political keys to reducing dependence on foreign countries and building resilience,” he said.

The economics ministers from Thuringia and Saarland, Wolfgang Tiefensee and Anke Rehlinger (both SPD), recently pleaded for temporary export restrictions as a last resort to get the problem under control and to resolve bottlenecks in companies.

Which special factors cause bottlenecks

Federal Minister of Economics Peter Altmaier (CDU), among others, rejects a temporary export ban. At a video link with the economics ministers of the federal states last Wednesday, Altmaier had announced a round table on the subject.

According to IW, a number of different factors come together when there is a shortage of raw materials. The institute cites the lack of availability of semiconductors as an example. The delivery problem, which has already led to production interruptions in Germany in the automotive industry, is also due to the high demand for entertainment electronics, the loss of production capacities and the additional inventory build-up due to trade conflicts. This ultimately leads to delivery bottlenecks for a number of products, but also to higher prices.

The development is similar for other raw materials. Metals, measured by the industrial metal price index (IMP index), were at a “record level”. The price of wood has also “risen significantly” in the last few months, states the IW.

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A survey by the Ifo Institute also shows how dramatic the situation is. After that, the German construction industry will be slowed down by a “considerable” shortage of materials that has not been seen for decades. “This is an unprecedented bottleneck since 1991”, it said in an analysis published on Monday by the Munich research institute. Due to the lack of materials, construction activity was at least temporarily impaired in April.


The German construction industry is increasingly lacking in material.

(Photo: dpa)

In April, 23.9 percent of the companies surveyed in the building construction sector reported problems in procuring building materials on time, it said. For comparison: According to the Ifo Institute, the share was only 5.6 percent in March. The survey took place as part of the monthly Ifo business climate survey. According to the research institute, around 800 companies from the construction sector took part in the survey.

The Ifo Institute also referred to special factors that are currently putting the wood industry under pressure. Accordingly, a comparatively strong onset of winter in parts of the USA could have delayed wood production, processing and transport.

The IW researchers also see special effects for shortages:

  • For some products, the demand for the corona crisis has simply increased significantly. The experts cite bicycles and selected goods in the health sector as examples.
  • The IW sees a further cause in the fact that there was a slump as a result of the lockdown measures and then a surprisingly quick recovery, which suppliers could not have adjusted in time. The recovery of world trade and thus the demand for German export goods was “considerably faster” compared to previous crises. “This creates a delivery backlog that can be processed slowly.”
  • The situation is similar with the global transport of goods, which is still affected by the corona pandemic. “After the global economy and world trade came to a screeching halt a year ago, a lot has to be replenished,” the IW researchers analyze. Above all on the way from China to Europe it stagnates because, for example, there is a lack of containers and, in some cases, ship crews.
  • According to IW, delivery problems also result from individual events. The fire in semiconductor factories or the interim blockade of the Suez Canal have exacerbated the situation. “While this shipping route, which is important for world trade, is free again, destroyed production capacities cannot be easily replaced,” says the study by the IW researchers.
  • Trade disputes also contribute to scarcity. As an example, the IW cites Chinese electronics manufacturers who are said to have stocked up on chips in order to protect themselves from potential trade conflicts.

More: The rally in commodity prices is driving up costs for the energy transition


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