News Roundup

Are you ready to uncover some of the most pressing issues in the global supply chain landscape? From the alarming spread of toxic PFAS chemicals across the British countryside to Samsung Electronics' eye-popping 1,400% profit surge fueled by the AI boom, this episode of the Chain Reaction Podcast covers it all. We also spotlight China's leading role in renewable energy investments and the substantial financial commitments being made worldwide to green industries. Additionally, we unravel the shocking quality control problems at Boeing, as exposed by whistleblowers, and delve into the escalating trade tensions between the EU and China over new tariffs on Chinese-made electric vehicles.

In the second segment, we turn our attention to the burgeoning EV battery market, with a specific focus on BYD's impressive growth in battery deliveries and the intensifying competition in this sector. We explore strategies for de-risking supply chains amid global disruptions, emphasizing the critical role of data management and resilient networks. The evolving energy mix in the U.S. and the increasing regulatory frameworks, such as the EU's updated Union Customs Code, also take center stage. As we wrap up, we touch on current crude oil market trends and set the stage for our next episode, which will tackle storage and inventory management. Tune in for expert insights and actionable strategies to navigate today's complex supply chain challenges.

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Chapters

• 0:02 Global Supply Chain News Roundup
• 13:31 Navigating Global Supply Chain Challenges

Transcript

Tony Hines: 0:02

Hello, tony Hines. Here You're listening to the Chain Reaction Podcast all about supply chain advantage. This is the News Roundup all things impacting global supply chains this week, and you're going to catch up on them in just a moment. So stick around, stay tuned, stay informed. Well coming your way PFAS chemicals, samsung windfall profits due to AI, china leads on renewable energy investment and Boeing whistleblowers singing like canaries Training reaction.

Tony Hines: 0:44

Now you've probably heard me talk about PFAS chemicals in the special edition I did a few months back all about these forever chemicals. Well, in the news this week in the United Kingdom it says swathers of the British countryside have been sprayed with these pesticides these forever chemicals, and the polluting air or soil and waterways, and, of course, these are a major threat to public health. An analysis by the environmental group FIDRA reported in the Eye newspaper said that they found pesticides containing potentially dangerous chemicals equivalent of 10.7 million hectares of arable farmland in 2022, and they say that this is an area about the size of iceland. So doesn't look like we're learning any lessons about these chemicals. But pfas these per and poly fluorinated alkyl substances that's what it stands for are a group of more than 10 000 industrial chemicals that have been linked to health problems. And if you want to know what these chemicals do, go and pick up the special episode I did on PFAS and have a listen and you'll hear some of the damage it's done in the United States and obviously here in the United Kingdom in this particular article.

Tony Hines: 2:04

They're known as forever chemicals because they take about a thousand years to degrade. So once they're in the soil, in the rivers, in the water, you just can't get rid of them and they're used for pesticides on crops. They're a major source of pollution in Britain's rivers. Not a single waterway in England and Northern Ireland has been assessed as meeting good chemical health. One type of PFAS called PFOS is responsible for about half of these ordered failures. When they check rivers and of course they enter the waterways in various ways, they wash in with rainwater off the fields and they can get into drinking water and then they're in all of our bodies they're in the fish population, they're in the animal population and so it goes on. It's reported that since Brexit, the UK has fallen behind the EU in banning dangerous chemicals and has failed to ban 36 harmful pesticides that are already outlawed in Europe. So another Brexit disaster.

Tony Hines: 3:17

Samsung Electronics expects profits for the three months to June 2024 to rise by 1,400%. It's 15 times up on the same period last year and it's all down to AI. The artificial intelligence boom has lifted the price of advanced chips and that's driven up Samsung's forecast for the second quarter. Samsung is a South Korean tech giant and it's the largest maker of memory chips, smartphones and TVs. Samsung's shares rose on the news, up by 2%. It's also increased its overall profits by a factor of 10. For the first three months of this year, profits have risen to 10.4 trillion won, that's about 7.5 billion dollars, or nearly 6 billion pounds.

Tony Hines: 4:10

The global spend on renewable energies is said to be 675 billion dollars in 2024,. According to the International Energy Agency, china is forecast to invest the most in renewable energy in 2024, the figure being $359 billion. The European Union's investing US$106 billion, the United States US$85 billion, latin America US$41 billion, india US$37 billion, africa US$22 billion and Southeast Asia US$15 billion. It's quite interesting to see that China is the leader in this investment. It's a country of paradox in many ways. China controls 80% of the world's solar panel supply chain and for many years China has been investing heavily in renewable energy. It's expected to spend a staggering $675 billion in 2024, according to an International Energy Agency report. Governments around the world have also invested hundreds of billions in green industries of the future. The investment in clean energy is set to increase $370 billion in 2024, according to the International Energy Agency. President Biden's Inflation Reduction Act passed in 2022, has also stimulated investment in the United States, and it's encouraged inward investment from countries like South Korea. South Korea CNN broadcast an interview this week with Merle Myers, a 30-year veteran at Boeing, and he said that Boeing managers at the Everett factory used to meet production deadlines, including taking damaged and improper parts from the company's scrapyard storehouses and loading docks.

Tony Hines: 6:05

He's one of many whistleblowers that's raised allegations about the lapses in quality at Boeing's factory, including an official federal complaint from one current employee that Boeing hid potentially defective parts from the Federal Aviation Administration inspectors and it's likely that some of those parts ended up on planes. And this is all in the trail of the highly controversial statements that have come from the company in the past few months. Boeing seems to have a major quality issue presently and that's losing trust amongst investors, buyers of the planes and, of course, the workforce itself. The CEO, dave Calhoun, is already leaving the company this year as a result of all the difficulties faced by Boeing, and it's still under investigation by the Federal Aviation Authority. Merle Myers was a former quality control manager and he said that workers on its 787 Dreamliner factory in Everett routinely took parts that were deemed unsuitable out of an internal scrapyard and put them back on factory assembly lines. So the story goes on.

Tony Hines: 7:38

Eu tariffs in China have taken effect on EVs from this week. China also announced its next step in the anti-dumping investigation into European brandy coming in to China, which increases the tension between the EU and China. The tariffs come into force at the highest rate of nearly 38% 37.6% on Chinese-made EVs, and the prospect of retaliation is on the table. They're also looking at EU pork. I reported these stories in last week's news round and if you want to find out more, you can go back and listen to that one. China wants the EU to cancel the tariffs For the next four months. These tariffs are provisional and intensive talks are expected to take place between the two sides.

Tony Hines: 8:21

Well, the fallout from the additional duties applied to Chinese imports of EVs continues and SIC has requested a hearing from the European Commission on the extra duties that it faces. According to news out of the company on Friday. They're unhappy about these provisional tariff increases, as are many others, of course, and they said that the European Commission has overlooked some of the information and counter-arguments submitted by SIC during the investigation. Sic, of course, is a state-owned Chinese watermaker, so this is going to rumble on and on until some adjustments are made. Provisional duties of between 17.4% and 37.6% are designed to prevent what the Commission President, ursula von der Leyen, has described as a flood of cheap EVs built with state subsidies. So it's all part of anti-dumping, and the report outlines a reluctance by the Chinese government and SIC to cooperate with the investigation, and that's why they've slapped a higher tariff of 37.6% on SIC.

Tony Hines: 9:31

Byd and Geely face lower tariffs of 17.4% and 19.9% respectively, on top of the EU's standard tariff of 10% on car duty imports, and that's because they co-operated with the Commission. Chinese automaker Cherry has said it's set up a joint venture with Spain's EV Motors which will help to offset the tariffs placed on imports into the EU. Production of the Barcelona-based site will start by the end of the year. According to Charles Zhang, who is the company's vice president, the site isn't big enough to accommodate the carmaker's medium and long-term production plans to Europe and they're looking for a possible second site. So you can see this is in response to the tariffs placed by the EU on Chinese imports. So already the Chinese automakers are looking for ways in which they'll be able to get round the tariff. Other automakers have said they've moved enough stock into Europe already to see them through till November, thus avoiding the immediate concern of these increased tariffs. And hopefully, by the time those tariffs come into force they might have been adjusted in some way through the negotiations that will take place between the EU and China that will take place between the EU and China. Sticking with the car industry, toyota reported to Japan's Transport Ministry this week after completing an investigation into the certification process for all domestic models for the past 10 years, and they said they didn't find any new cases of wrongdoing with regard to the certification applications of its car models beyond the ones that had already been reported last month. I reported on the original story about this a couple of weeks back. So it seems that the investigation is now complete and Toyota can move on.

Tony Hines: 11:25

Well, we've had elections in Europe this week and a change likely coming in France, with the far right winning the majority in the election In the United Kingdom. There's also been a general election on the 4th of July American Independence Day and the Labour Party has won a landslide victory. The new Prime Minister is Keir Starmer and Rishi Sunak, and the Conservative Party bow out. So all change. And of course, we have the American election coming up in November, and who's likely to win that one, well, we don't know yet, but we'll find out soon enough. US unemployment has climbed this week to 4.1%, and that's the rate for June. Government and healthcare were the biggest contributors. About three quarters of the increase comes from those sources. There's change to the labor market. Of course, we'll encourage the Fed Reserve to actually lower interest rates shortly. As the employment market cools, us inflation appears to be easing.

Tony Hines: 12:34

Some more news out of China about car batteries. Catl is ranked number one globally in terms of battery deliveries for energy storage since 2021. It has more than 40% of the global market share, according to its annual report, and it has state-owned power companies such as Huaneng, as well as top energy storage systems manufacturers, including Sungrow Power Supply. Catl saw deliveries for storage soar 46.8% to 69 GWh in 2023. Energy storage batteries account for 17.6% of CATL's total battery sales volume and that's up 12.5% since 2021. Tesla's Shanghai plant will be able to make 10,000 megapacks a year, with a combined 40 gigawatts of storage capacity.

Tony Hines: 13:31

According to reports, byd delivered 22 gigawatts of batteries for energy storage in 2023, and that's up 57% from 2022. Our pacing shipments growth of 15.6% to Europe. According to SNE research, byd's EV battery shipments totaled 135 gigawatts last year. And then there are many smaller players in the marketplace. Of course, the EV battery wars have only just begun and we're likely to see far more competition in this sector in the coming years. And also as Europe and the United States begin to develop their own capacity to build batteries, it will put further pressure on the markets. The only problem, of course, is that China has quite a stranglehold on the supply chain, and many of the minerals and mining operations around the world find their way through China before they find their way to EV batteries.

Tony Hines: 14:40

Now, when it comes to de-risking your supply chain, what can you do? Supply chains are impacted by all kinds of things that we talk about here on the Chain Reaction Podcast, such as labour disputes, weather events, criminal action, wars and natural disasters of all kinds, and we've had all sorts of disruption from the pandemic, from the Houthi attacks on the Red Sea, cargo ships, oil tankers and, of course, pirate acts off the coast of Africa, so there's plenty to consider. So we have to think about how we can add value, and for many companies, the question is what to do and what not to do, and where can you find partners that are equipped to extend your impact without pushing the constraints upwards? You should also consider how you spend your hard-earned revenue. Consider capital versus expense dollars. Many companies have to do more with less, and if you're going to do more with less, you might have to switch the way you spend from revenue expenses to capital expenditure, so that you can actually make things more efficient.

Tony Hines: 15:48

Data is also key. How you manage data, accelerate and aggregate those are two key steps you can take. So you want to accelerate the way you gather, transform and apply data, and you want to aggregate, and that gives you seamless integration through the use of cloud technologies. Keep those resilient efforts focused. As you create more resilient networks, then you need to manage more diverse networks and, of course, put metrics in place that can tell you about what's going on in your supply chains. Pay attention to provider solvency by diversifying your network.

Tony Hines: 16:26

Determine the true cost. Make sure you've taken all the costs into account when you're looking at the way you manage inventories, whether that's opening up new warehouses, running warehouses, configuring transport options and how you can improve the time it takes to get things to market All key to lowering cost. And, of course, course, you want to work with partners who are flexible, because they can move fast. They'll be more agile, and that's critical when it comes to de-risking your supply chain. And those 10 tips were identified in one of my favorite reads, which is inbound logistics. So there we have it, pretty much along the lines of the way. I might have just talked about those things off the cuff.

Tony Hines: 17:18

Now, when we take a look at what actually powers our plants, our transportation and fulfills all our energy needs, about 40 to 60 percent of a manufacturing company's energy and carbon footprint can reside upstream in its supply chain, whether that's raw materials, transport and packaging to operational processes of manufacture. But of course, it can be as high as 80 or even 90 percent of cost, and it's something that all companies are concerned with, especially with regulations, increasing the move to net zero and, of course, meeting the environmental sustainable goals. We're still very much focused on crude oil and natural gas in liquid form. Petroleum makes up about 36% of the US energy mix, but of course, everybody's searching for non-fossil fuel alternatives to provide green, clean energy. Natural gas, of course, is clean burning fossil fuel, and that makes up another 33% of US energy consumption. It's a popular choice when it comes to heating homes and for businesses in search of lowering carbon emissions. Renewables such as wind, solar, hydroelectric, biomass and geothermal sources make up about 13% of US energy. Coal still forms a part of that energy mix, but it's declined to around 10%, and nuclear power still makes up about 8%. So you can see the mix is changing and it's likely to change further as we move into the future. Thanks to the US Department of Energy for the data.

Tony Hines: 19:04

Now everybody working in supply chains is aware of the increasing regulatory frameworks that have come into effect, and recently the European Union updated its Union Customs Code and anybody transporting cargo through or to the EU needs to be aware. The changes come about as a result of the Import Control System 2 rollout. This is the third release of a new pre-arrival and security system for the European Union. Ics2 mandates that all Bill of Lading issuers provide advanced cargo information which addresses security and safety concerns. Shippers have to provide a comprehensive set of entry summary declaration data for all goods that cross the EU border, and that's regardless as to whether they're coming in or going out. Failure to comply with these new regulations will result in cargo shipments being halted and delayed at the EU custom borders, and they won't grant clearance until they're satisfied. Insufficient declaration will be rejected or subjected to intervention and there might be, ultimately, non-compliance penalties. So you need to get things in order to make sure you're prepared. Unified platform technologies will help shippers to bridge the regulatory gaps when it comes to filing global security documents.

Tony Hines: 20:39

Now, crude oil prices on the market this week as we close the news round were around $83.87, so they've increased slightly over the past few weeks. Well, that's it for this week. I hope you've enjoyed the episode, with all the news roundup from around the globe impacting global supply chains this week, and I look forward to seeing you in the next episode of the chain reaction podcast, when we'll be talking about storage and inventory management. Don't forget to subscribe to the chain reaction podcast on your favorite platform and that way you'll be the first to be notified when new episodes appear and you can keep up with everything that's happening in global supply chains with the Chain Reaction Podcast. I'm Tony Hines, I'm signing off and I'll see you next time in the Chain Reaction Podcast. Bye for now, thank you.