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Supply chain challenges continue in Southeast Asia

September 1, 2022
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Why this is important to Wisconsin businesses: Southeast Asian countries are seeking alternative suppliers and Wisconsin companies may be able to fill some of the gaps.

Supply chain problems and high prices for raw materials continue to plague several Southeast Asian countries and they are looking for new suppliers, especially in the U.S.

Slowdowns that began during the COVID-19 pandemic have dragged on as a result of continuing pandemic lockdowns in China as well as Russia’s invasion of Ukraine. Container shortages and record-high shipping charges are still squeezing the availability of commodities such as chemicals, plastics and electronic inputs and have kept their prices high.

As a result, manufacturing is suffering in numerous industries in Southeast Asian countries. Here are some examples:

  • Indonesia: The chemical industry is one of the main pillars of manufacturing, and raw material import prices continue to climb.
  • Malaysia: Shortages of imported raw materials for fertilizers and pesticides have driven prices to rise. That, in turn, has resulted in higher prices for vegetables grown in Malaysia and increased imports of vegetables from other countries. In addition, higher raw plastic resin costs and shipping problems have hiked manufacturing costs in a number of industries.
  • Singapore: More than 90% of the food supply is imported and one of the main sources is Malaysia. In June 2022, after Russia’s attack on Ukraine aggravated a global feed shortage, the Malaysian government issued a temporary ban on exporting chicken products until production and prices stabilize.
  • Philippines: Electronics make up about 50% of the country’s exports but the shortage of semiconductor wafers—which are largely imported—has curbed the industry’s ability to increase production to meet rising global demand.
  • Thailand: Plastic resin is a key raw material used in manufacturing, and the prices of polyethylene and polypropylene have jumped since the pandemic. In addition, Thailand is the largest automotive producer in Southeast Asia and the 12th largest in the world, and raw materials for that industry—including semiconductors—have been in short supply, limiting production. Both Russia and Ukraine had been suppliers of raw materials used to produce semiconductors.
  • Vietnam: A major exporter of furniture, Vietnam has had to appeal to the U.S. and the European Union for supplies, since Russia and Ukraine were two of its primary sources of timber. The paper packaging industry in Vietnam also depends heavily on imported sources of pulp, mainly from North America, Europe and Japan, according to U&I Logistics in Vietnam. Short supplies and high raw material prices are a continuing problem. In addition, Vietnam is responsible for half of Samsung’s global smartphone production and relies on China for components, but COVID-19-related lockdowns in China have limited the availability of those parts.

Industry experts predict supply chain issues worldwide will not end soon. This creates opportunities for Wisconsin suppliers in a variety of sectors to offer their products as alternative sources.

 

 

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