China is confined and Mexican industry suffers

Mexico City (24 May 2022).

The new confinement in China again affects the delivery of inputs that are imported from that country to Mexico and that are used by Mexican manufacturing.

The decision of the Asian country has caused effects on trade flows and logistics that manufacturing companies installed in Mexico have, especially in industries such as automotive, auto parts, electronic electrical, medical, equipment and heavy machinery, mechanical metal and plastic materials.

“When we expected this to normalize, comes this outbreak of this variant of Omicron that has caused the closure of China in neuralgic points such as Shanghai and other key ports; without a doubt that is affecting us and is hitting us in logistics and supply chains,” said Israel Morales, director of the Committee on Trade Agreements and Treaties of index nacional, which groups manufacturing companies.

The impact on manufacturing occurs because parts that are required from Asia are imported and then supplied finished goods, subassemblies or parts for another production chain.

The delivery times of the manufacturing industry were lengthened and depending on the product it delivers and the distance, the affectations have been seen; if before they took 30 days, now they can go to 45 days.

Before, he said, 98 percent of manufacturing businesses made their deliveries on time, but now only 68 percent have been able to do so.

“We’ve seen a slowdown in productivity, in growth; while it is true that our industry is one of the few that continues to grow in the country, this (confinement in China) has caused a stagnation of growth, although demand is high, but there is a lack of inputs, because we have many challenges to meet demand, “said Morales.

For this year, manufacturing expects certain conditions to improve, such as the cessation of the war in Ukraine and Russia because that raises the cost of fuels and logistics, as well as a drop in Covid infections.

Not to mention that the price per container transfer is still very high, compared to pre-Covid.

In May, the transfer of a 40-foot container from Shanghai to the port of Manzanillo or Lázaro Cárdenas cost $6,800 and the 20-foot container $6,100, according to information from TL Pacifico.

However, before the pandemic on average they were worth between one thousand 500 and one thousand 800 dollars, according to the company.

The falling price responds to the closures of the factories in China, since in the absence of activity, the ships left empty, said Jaime Vélez, executive director of TL Pacífico.

Source: Reforma Negocios