Lack of inputs becomes a major obstacle to industry recovery

The industry suffers from a lack of inputs and high prices. The mismatch of supply and demand emerged with the pandemic. Photo: Advertisement / Tiger

The Brazilian tax burden, which traditionally appears as the number one concern of the national industry, has lost its position as the biggest headache for entrepreneurs in the sector, indicate surveys conducted by the National Confederation of Industry (CNI). The second quarter of 2021 was the fourth consecutive period in which the shortage and high price of inputs and raw materials were identified as the problem that most hinders production in the country.

According to the CNI, the persistent combination of overheated activity in factories and limited stocks at suppliers means that the problem remains at the center of the attention of manufacturers, despite the percentage down compared to the previous quarter. The lack of raw materials and inputs was mentioned as the main obstacle to activity between April and June by 63.8% of the industries surveyed. Next come the high tax burden (34.9%) and the exchange rate (23.2%) – in the first quarter of the year the percentages were 67.2%, 33.4% and 31% respectively.

In the most recent survey, the energy is also remarkable. In the survey, the confederation asks entrepreneurs to indicate up to three factors that represent problems for the daily activities of their business, and the high cost or lack of electricity has gained mentions compared to the first quarter – 18.2% of manufacturers mentioned the problem as one of their main concerns, the biggest brand since 2016.

The country is currently experiencing the worst water shortage in over 90 years, with significant impacts on the electricity sector. A new study by consultancy firm PSR has concluded that even a small increase in the pace of energy consumption in the coming months could increase the risk of localized outages in the country.

Pandemic imbalance

The source of the problem lies in 2020, when industry shutdowns due to the Covid-19 pandemic around the world created a mismatch between supply and demand in supply chains.

An example of the situation is the global semiconductor crisis, which is hampering the production of several segments, including automakers, who even halt production for lack of components.

According to CNI’s head of economic analysis, Marcelo Azevedo, inventories fell again and again moved away from the level expected by companies. In June, the actual inventory indicator compared to industry forecast recorded 48.7 points (below the 50 point line which indicates that planning and availability are aligned) Distance to forecast was greater in June compared to April and May, when the indices were 49.6 and 49.2 points respectively.

“In March and especially in April of last year, stocks were very low and we did not believe in a very rapid recovery. Fortunately, she arrived faster than expected, but [trouxe] this disarray in the chains between suppliers and producers ”, summarizes Azevedo. “This has continued to worsen as the recovery has strengthened – not only in Brazil, but in other countries to a greater or lesser degree,” he adds.

There is no forecast of normalization and some inputs are expected to cost to return to a level that meets demand, affecting the recovery of the industry – and not just production.

“In the case of packaging for example, in addition to the issue of stocks, there has been a big change in consumption habits. I think everyone has the experience of more home consumption, more online orders. This involves a lot more cardboard and plastic and [o desequilíbrio oferta e demanda] tends to last a long time even after the pandemic, ”observes the CNI representative.

Losses in various segments of the industry

Tigre, one of the largest manufacturers of plastic materials for civil construction, has struggled with the rising cost of resins due to imbalance in production lines after the worst times of the pandemic. One of the alternatives found was to transfer part of the effect to the consumer. The other part has been absorbed by the company.

According to the company’s executive director, Luís Filipe Souza Fonseca, the pressures were felt more strongly until the middle of the second quarter. “Now the prices have stabilized,” he says.

Another company affected by the high costs of raw materials and inputs was the Japanese multinational Nidec, one of the world’s largest manufacturers of compressors for refrigeration and which has two units north of Santa Catarina.

The most significant impacts were on iron, copper, aluminum and resins. In addition, there has been a sharp devaluation of the real against the dollar since the start of 2020. One of the alternatives found was to look for alternative suppliers.

“The world was not prepared for such an aggressive V-shaped recovery,” said the company’s vice president of strategy and investor relations, Guilherme Almeida.

One sector where the problem is the lack of raw materials and inputs is the automotive sector. In the first half of the year, auto production fell 22%, or more than 300,000 units, compared to the same period in 2019, before the pandemic. The National Association of Motor Vehicle Manufacturers (Anfavea) calculates that the lack of semiconductors prevented the production of 100,000 to 120,000 vehicles between January and June. The situation did not improve at the start of the second half of the year: the most recent data point to the lowest production in 18 years for the months of July.

“There is internal and external demand for a greater volume of vehicles, but unfortunately the lack of semiconductors and other inputs has prevented the industry from producing everything that has been requested, despite the logistical efforts made by the companies. companies, “Anfavea President Luiz Carlos Moraes said in a statement.

According to the official, vehicle inventories at factories and dealerships – which total 85,000 units – are the lowest in the past two decades, and there is no forecast of a normalization of chip supply until the middle of the year. next year.

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