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EDITORIAL – The perfect storm on the markets, skyrocketing prices and shortage of raw materials


In these last few months of coexistence with the health crisis (hoping that is heading up towards the end), which has been gripping us for more than one year and a half, there has been a succession of very comforting data regarding the economic growth in progress.

We can immediately say that the hypothesis of the 6% growth of the Italian GDP (gross domestic product) at the end of the year is a figure that goes beyond the most optimistic expectations. However, the data must be interpreted, decoded, and read properly.

This recovery has a “compensating” effect regarding the “flat encephalogram” of GDP in the last 18 pandemic months. The run-up of the oil prices, the container costs and the shortage of many other raw materials, through which the production engine is practically “running”, have been the obstacles of the ongoing recovery.

Distracted by the immateriality of the digital technology, which has cancelled the distances of the meetings and purchases, we have simply forgotten a detail that doesn’t has a minor importance. The material economy is still weighing a lot. There are raw materials, production and transportation. What is happening and why the raw materials are insufficient and the costs are growing?

The sudden growth in the global demand has shown the weakness of the main routes and caused gigantic delays in the supply of the industrial components. Remember the extraordinary images of the Ever Given ship that blocked the Suez Channel for days? The asymmetry between the giant ship and the tiny excavator? This incident has shown how fragile is the global network of the sea connections, thanks to which almost all the merchandises are moving.

Those who have suppliers on the other side of the globe have serious problems, so much that many of our companies have their warehouses saturated with unfinished products.
Skyrocketing prices and physical shortage of the products. But the blackout is completed by the price of the oil, which is now around 70 dollars/barrel, more than 50% upper, compared to one year ago.

There is also a positive effect in all this. Many Italian companies and others are reconsidering the need of shortening the production and subcontracting chains. Today, in front of everything that is happening on the markets, we are discovering the validity of a different approach. There is a reconsideration underway regarding the forced relocations of the recent past.

In many cases, the suppliers, need to be in a smaller operating range and the supply chain needs to be shorter. There is a gap that needs to be filled. But for this, there are necessary: skills, entrepreneurial talents, the wish to invest, and to try to enter on the markets that are always more selective and competitive.

By Marzio Nava
Detergo Magazine – Number 10, October 2021