BLOG – Inflation pressures build on prolonged supply chain disruptions

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

The pandemic continues to upend global supply chains, threatening growth-damaging inflation.

Semiconductor shortages are set to last for at least another year. Container freight rates have gone up again on the Far East to Europe and Far East to US East and West coast routes.

European polyethylene (PE) and polypropylene (PP) price premiums over China remain at record high levels, as the updated chart in today’s blog post details.

This tells us that despite tight polyolefins supply in Europe leading to strong arbitrage opportunities, getting PE and PP supply to the region remains very difficult because of container shortages.

The price differentials also tell us China’s economy has lost momentum, partly because of the global inflationary impact of supply-chain disruptions that also include shortages of petrochemicals, wood, metal and other raw materials.

Labour is also in tight supply in China, the US and the UK for pandemic-related reasons.

The US Federal Reserve says supply chain inflationary drivers are temporary. But they said that about oil prices in 1964 and we ended up with the 17-long period known as The Great Inflation.

It is unlikely to be as bad this time but hold onto your hats. Interest rate rises seem very possible.

Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.