August 5, 2024
Supply chain stories for the week…
1: A new Chinese port in Peru is causing concern in the US
Summary: A deep-water port built by COSCO in Peru is causing concern in the US as it gives Chinese firms access to a critical region and its minerals, and control of a major port in the America’s.
Analysis: China has been doing business, and building infrastructure in the America’s for at least the last 15 years, often as part of the Belt and Road Initiative (BRI). The US has not been building infrastructure, but instead trading and investing in areas such as oil and gas production. But China is cutting a better deal than US companies, and with a poor track record of US diplomacy and overthrowing Latin American governments (30+ since the 1950’s), countries are looking for other options and China is filling the vacuum.
2: Gen Z workers are turning blue-collar work cool
Summary: Social media is helping Gen Z show their work, and that it is cool to be a blue-collar worker.
Analysis: Blue-collar work such as plumbing and welding is taking up new interest by some younger workers. You can make almost as much, if not more in some cases, than white-collar jobs, especially in certain fields. With baby boomers retiring and fewer workers taking up blue-collar jobs, it is good to see more interest in them. The US will need hundreds of thousands, if not more, of them in the coming decade to fill the gap and ensure continuity of services and standard of living.
Summary: VW is investing $5B in Rivian not for production capability, but for its software and technology.
Analysis: VWs own in-house software development is lacking, so they need help. Rivian is more technology-focused and has extensive experience with software and hardware integration. VW had to do something as it has spend hundreds of millions of dollars in building software, especially in China, with poor results. Rivian needs investment, VW needs IT, it’s a good match, but remains to be seen how it will go. These challenges are industry-wide outside of China.
4: Boeing is trying to train thousands of new workers
Summary: After an exodus of skilled workers, Boeing is ramping up recruitment and training for new workers in the thousands.
Analysis: The pandemic challenges led to a large amount of retirements, as well as the delay in production led to more challenges when restarting production. The loss of knowledge and skilled labor has affected not only production and quality but also Boeing’s ability to ramp up further. Expect more focus by Boeing and its suppliers on worker training and labor stability.
5: Americans really hate inflation
Summary: The Federal Reserve kept inflation targets too low, and now Americans are balking at higher inflation. There is an assumption that a higher than 2% inflation target would be good for the Fed, and the US.
Analysis: with 30+% inflation since 2020, Americans are tired of rising costs, supply chain challenges, and lack of goods. The Fed has aimed at a 2% inflation rate, but it is looking and more of a range of 2-3%. Once that is made, inflation above 2% will become the norm. With this, the amount of government spending is not slowing down but increasing, this will assist in driving inflation higher, not lower, in the long term unless spending is slowed down.
Something unique….
Denmark is set to charge farmers 100 EUROS per cow as a carbon tax.
Denmark will start to charge farmers 100EU per cow because they can emit “carbon",” in this case methane, and it is harming the environment.
What starts in Europe often spreads to other regions. Charging animals based on the “carbon” they emit is controversial, and will not go over well. It could lead to social instability and fewer animals available for food.