Supply Chain Disruptions Plague the EU, UK Markets

Denis Storey
April 20, 2022

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As the world’s economies crawl out from under the shadow of the pandemic, no country – or region – has been able to escape supply chain issues, inflationary pressure, and the repercussions of geological conflict.

  • Nearly 150,000 farmers, ranchers, and hunters took to Madrid’s streets in late March to protest the Spanish government’s inability to rein in rising food and fuel prices.
  • The cost of transporting products from Spain across Europe to the Netherlands – the produce capital of Europe – has soared an extra €1,000 per truck this year because of climbing diesel costs.
  • Climate change has also disrupted supply chains, with heavy rains in Spain and Portugal causing deadly flooding. Spain saw the wettest month on record in March 2022.
  • The cost of fuel to heat the greenhouses in the Netherlands – by as much as 400% in some cases – has spiked so high that it’s become too expensive to maintain them.
  • The Moroccan government halted most tomato exports to the EU late last month to hold the line on prices ahead of Ramadan. Morocco, the EU’s largest external tomato supplier, provides the bloc with 430,000 tons of the produce annually.
  • Retailers in the EU are making things worse by taking a hard line on prices, leading to a stalemate in the supply chain on cost. For example, the cost of growing cucumbers has more than doubled from 27 cents to 57 cents due to climbing fuel and fertilizer costs. So rather than increasing prices, cucumber growers have stopped growing them.

This litany of bad news is just a small sample of the factors wreaking havoc with the EU supply chain. Congestion at the ports in northern Europe – and at neighboring railroad and trucking junctions — has only gotten worse since mid-February, according to Flexport, a San Francisco-based freight forwarding and customs brokerage company.

Things aren’t any better in the United Kingdom. The Lloyds Bank UK Recovery Tracker reports that skyrocketing commodity prices and shrinking supplies have depressed food and beverage production to an eight-month low. Even worse, half of UK food and beverage makers said they’d raised prices over the last 30 days.

Naturally, these ongoing cost and shipping issues have forced many manufacturers to consider their alternatives. Some have pursued reformulation to incorporate better-priced or more readily available ingredients, while others have started looking at reshoring. According to research from BCI Global, more than “60% of European and US manufacturing companies expect the next three years to onshore or re-shore part of their Asia production,” according to research from BCI Global. In addition, roughly half of the European manufacturers BCI surveyed planned to move production to Germany, the Netherlands, or Belgium.

“The research results clearly show that reshoring is a hot topic on the agenda in the board rooms of international companies,” Patrick Haex, BCI Global’s managing partner of global supply chain solutions, explained. “The many supply chain disruptions in the last years with Covid-19, lack of products and components, and skyrocketing ocean freight rates force companies to reconsider their manufacturing footprint. Sixty percent of the companies expect the next three years to move part of their China and Asia production back to Europe or the US. Agility and flexibility are now the key drivers for the value chain set-up, at the expense of lowest cost solutions.”