Not until recently, the news about COVID-19’s delta variant was brought to our attention. This surely is not such a good thing for the supply chain industry. That’s because this fast-spreading variant has thrown factories and ports into distress.

The surge in Covid-19 infections in Asia is blending with supply-chain blockages across the world’s biggest source of manufactured goods to cause bigger problems for everyone. In fact, countries that were once among the most successful in containing the virus are now the ones suffering!

Did you know the snarls in Asia risk twisting their way through global supply chains just as shipments would usually ramp up for the Christmas holiday shopping season? Well, that’s where the United Nations estimate around 42% of global exports are sourced.

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This problem that has started in Asian ports have the capacity to ripple slowly and will certainly show up later as delays in places like Los Angeles and Rotterdam have already commenced and prices for consumers are starting to rise up. That’s not all. As the past year was written down in history as a torture year for exporters, the flare-ups are worsening, with sky-high shipping costs due to a shortage of containers. Raw materials such as semiconductors are also becoming expensive and difficult to source amid their red-hot demands.

According to Deborah Elms, executive director of the Singapore-based Asian Trade Centre, “Delta is likely to disrupt trade in Asia significantly.” She further added that most of the markets had been fortunate in managing Covid well so far but as Covid-19 continues to spread, the lucky streak is likely to end for a lot of locations.

The Rising Supply Chain Disruptions
In China, the world’s third-busiest container port was partly shut recently and in Southeast Asia, among the worst-hit regions, factory executives stalled production of electronics, garments and scores of other products.

The fact is that the delta variant is as contagious as chickenpox. It has infiltrated China’s tough border defences, seeding the first cases for months in places like Beijing and Wuhan. Similarly, Indonesia is leading Southeast Asia in cases and deaths, pushing the region towards being among the worst-hit places globally as vaccination rollouts still lag.

Did you know the World Trade Organisation forecast Asia to lead an 8% rise this year in global goods trade?

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Well, in Southeast Asia, manufacturing managers saw a slump in activity last month as critical exporters struggled to keep their factories running in such difficult times. That said, Indonesia, Malaysia, the Philippines, Vietnam, and Thailand accounted for a combined 5.7% of global exports. China imported 38% of its data processing machines and 29% of its telecommunication equipment and the US depends on half its semiconductor imports from the block.

Amidst all of that, Vietnam’s government has taken extreme measures to minimize the hit to exports as new cases jump from single digits in April to about 16,000 daily! Authorities have ordered manufacturers to allow workers to sleep overnight at factories as the share of the population fully vaccinated lingers around just 1%.

Conclusion: Economists are already pairing their growth forecasts for Asia as the real-time indicators show a hit to consumption and other activities of the supply chain. Among other reasons for recently downgrading the global growth forecast of the industry, economists also highlighted the risk from Asian countries with low vaccination rates.

The surge of the virus spread comes as exporters continue to complain about sea freight costs that are likely to be multiples of what they were before the pandemic.

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