Turmoil in Global Supply Chains: Leadership Shake-Ups, EU Challenges, and Energy Strategies

Brace yourself for a deep dive into the seismic shifts shaking global supply chains. What happens when the leader of an automotive titan suddenly exits amid internal strife and external pressures? Discover how Stellantis grapples with Carlos Tavares’ abrupt departure and the high-stakes race against EU emissions targets, all while Intel undergoes its own leadership transformation with Pat Gelsinger stepping down. Plus, there's a provocative twist as Donald Trump threatens tariffs against BRIC nations, potentially rewriting the rules of global trade. 

We also have a feature revisiting Baltimore to see developments since the collapse of the Key Bridge back in March.

Moving to the energy front, smaller British firms find themselves entangled in the web of the EU's General Product Safety Regulation. These complex regulations are forcing many to pull back from trading within the EU and Northern Ireland. As the clock ticks down on the Russian gas transit agreement through Ukraine, we explore its far-reaching consequences for energy prices and EU competitiveness. Tune in to learn about strategic moves like boosting gas storage and leveraging forward contracts to safeguard Europe's energy future. This episode is your guide to understanding the global currents reshaping supply chains and energy landscapes.

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Chapters

• 0:00 Global Supply Chain Disruptions
• 15:31 EU Gas Crisis and Energy Competitiveness

Transcript

Tony Hines: 0:00

Hello Tony Hines here. I'm your host for the Chain Reaction Podcast and it's great to have you along today. We've got a great episode coming up in just a few moments. Stick around, stay tuned and find out more. All things impacting global supply chains this week Chain Reaction. Supply chains this week Chain Reaction.

Tony Hines: 0:25

Well, shares in Stellantis have been knocked this week as the CEO Tavares leaves the company. It was rather a fast departure, apparently a fallout with the board about plans focused on cost-cutting. Companies struggling with lots of inventory, chinese competition and fixing the problem isn't as easy as many might think. The board at Stellantis weren't happy with the plans that Tavares was putting forward. They wanted him to focus on long-term strategy and he was simply focused on cuss-cutting. Well, sometimes you have to do that to get things better, but they obviously thought it was going too far.

Tony Hines: 1:06

Stellantis produces Jeep, fiat, peugeot and other cars. The share price has fallen as much as 10%. That's the lowest it's been since July 2022. Of course, difficult times ahead and now no CEO. They're struggling to get rid of overcapacity. Opinion says they've got bloated inventory in the North American market when global demand is sluggish and there's much competition from Chinese rivals, especially in EVs, of course. Last week they announced closures in the UK, with the Luton plant to be closed, the van manufacturing plant Same sort of reason, cost-cutting and competition and, of course, evs not taking off as fast as they'd hoped. It'll take some time to get a new CEO in place. It could be as long as the final quarter of next year, according to some. It's doubtful that investors will be particularly happy about this.

Tony Hines: 2:06

The cost-cutting exercise had hit particular relationships with US dealers and the US United Auto Workers Union. National dealers had been complaining that short-term profits meant rapid degradation for the Jeep, dodge, ram and Chrysler brands. And it all added weight to the problems that Tavares was facing and Stellantis, of course, strike action's been threatened. In recent months they've had lots of callbacks for cars because of problems, like many other auto retailers. Of course, shareholders and investors alike will be getting a little bit nervous right now which way the company's going to go next. And there's new rules coming into force in January Corporate average fuel economy and that requires around 21% of the firm's total sales during 2025 to come from electric vehicles. That's in the European Union. So these targets being set to try and get greener, cleaner vehicles are really hitting the auto industry quite strongly at the moment. The current mix of EV sales in the EU is only around 12%, so they've got a long way to go to get that cranked up. The fines could cost Stellantis as much as 3 billion euros, that's 3.1 billion dollars, if it doesn't manage to hit those targets.

Tony Hines: 3:35

The early exit of the CEO means it's going to be difficult all round, and they're talking about having a CEO management committee in the interim period. Well, we all know how difficult it is to get a committee to make decisions, so many are worried or concerned that that's not going to work either. Well, there was a major announcement by Intel on Monday too. Another CEO bites the dust. Pat Gelsinger is retiring after a distinguished career at the company which has spanned more than four decades. The Santa Clara chipmaker said Gelsinger has stepped down from the board of directors and they've named David Zinsnerner and michelle johnston holthouse co-ceos in the interim. Zinsner serves as intel's executive vice president and chief financial officer, while holthouse has been appointed to a newly created position the company describes as the chief executive officer of intel products. Leading Intel has been the honour of my life, said Gelsinger. People are amongst the best and brightest in the business and I'm honoured to call each and every one a colleague. Well, he spent most of his working career at the company and they've had some tough market times recently, but we wish him well. But we wish him well.

Tony Hines: 5:13

President-elect Donald Trump seems to be in good form at the moment with his tariffs and he's threatened again to impose 100% tariffs on block to nine nations. These are the BRIC countries who are trying to set up a rival currency to the US dollar as the world currency as they try to move away from the dollar. Trump wrote on social media at the weekend that they'd face tariffs of 100%, and the BRIC nations consist of Brazil, russia, india, china all part of that alliance along with India I think I've mentioned India South Africa, iran, egypt, ethiopia and United Arab Emirates. So the tariff tools come out again. Trump wrote on social media on his Truth Social. We require a commitment from these countries that they'll neither create a new BRIC currency nor back any other currency to replace the mighty US dollar, or they'll neither create a new brick currency nor back any other currency to replace the mighty US dollar, or they'll face 100% tariffs and should expect to say goodbye to selling into the wonderful US economy. They can go and find another sucker. He said Well, a quick roundup of the UK news this week that could impact global supply chains.

Tony Hines: 6:28

Well, the first one was a statement by the Chancellor of the Exchequer that said that she couldn't rule out tax rises during this Parliament. Just a week ago, at the CBI meeting, the Chancellor Rachel Reeves had told business leaders there would be no more tax rises in this Parliament. So which Chancellor of the Exchequer are we to believe? The one last week or the one this week? They're the same person, of course. It's just that the messaging is different.

Tony Hines: 7:07

Gallium and germanium they're used in semiconductors, and germanium is also used in infrared technology, fibre, optic cables and solar cells. Antimony is used in bullets and weaponry, and graphite. Antimony is used in bullets and weaponry, and graphite is the largest component by volume of EV batteries. Now all those particular critical minerals have been put on the list by China not to be exported to the United States. China's been sending signals for some time that it won't just sit back and accept the raised tariffs. It's likely to put restrictions on critical minerals to the United States as the trade tensions ramp up. So this could affect the chip sector, a sector already under pressure and down to many prices this year have gone up significantly. China said it was banning exports to the United States of critical minerals gallium, germanium and antimony and they have widespread applications for military products applications for military products.

Tony Hines: 8:30

Online sales as a proportion of total sales in retail have gone up year on year. They're only pushing up slightly, but it all is taking away sales from the high street. This year it's 27.6% as the proportion of online sales against bricks and mortar sales. Last year it was 26.7% and in October 2022 it was 25.9%. So those are the October figures for each year.

Tony Hines: 9:04

Now many of you will remember the 26th of March 2024 when the Francis Scott Quay Bridge in Baltimore was struck by the Dali, a container ship. Big one, 21,000 TEUs, crew of 21, including the captain, and it was only a few minutes out from the port. It was about 1 o'clock when it set sail, or just after, and by 1.29 it struck the bridge and six people were killed. They were road workers who were working on potholes on the bridge and they didn't get the notification that the ship was about to strike. But fortunately, the many vehicle drivers queuing to cross the bridge did get the message from the police after the crew had radioed through to say they'd lost control. Power on the ship had been lost and once the power's lost the rudder locks too. And the rudder had locked.

Tony Hines: 10:00

And of course there were various other contributing factors, such as the current in the water as it moved the ship towards a trajectory to strike one of the pillars on the bridge. And the bridge was brought down very quickly matter of minutes and of course it took weeks to sort it out. But everybody working on the incident seemed to do their job pretty well and they managed to get the port back open after about 12 weeks. So from the bridge striking, 12 weeks later they'd removed much of the debris that was blocking the channels under the original bridge, sufficient to get ships away out of Baltimore and ships into Baltimore. But of course the bridge will take much longer to repair and that's underway that work too, and we'll say something about that in a moment. It's going to cost about £1.8 billion to repair the bridge.

Tony Hines: 10:57

It's claimed that the whole incident will have cost about £3 billion lost output, lost business to the port and the various other factors. So the insurance claim against the ship and the ship's owners will be significant and apparently some of the initial investigations around the ship said that it had experienced a fault the day before in the electric circuits on the ship. So the power on the ship wasn't 100% and it's thought that a wire on one of the four generators on the ship there were two, lots of two generators, I think on the ship and one of the wires had actually short-circuited. And when that happens just like in your home when a breaker goes a circuit breaker and it knocks your fuse out essentially that's what happened on the ship the lights went out, the power was lost and the accident occurred. And most commentators seem to agree that if it happened 30 minutes earlier, it wouldn't have struck the bridge in the same way and caused the same damage, and if it happened 30 minutes afterwards, it may well have sailed right through the bridge, but nevertheless, big problem.

Tony Hines: 12:10

The vessel motor vessel Dali, is a Neo Panamax container ship. It's about 299.92 meters in length, that's 984 feet. The owner is Grace Ocean Private Limited since 2016,. Ocean Private Limited since 2016, and it's operated by Synergy Marine PTE, flagged in Singapore. Its safety record, the Dali, has a history of incidents, including a collision at the port of Antwerp in 2016, and a faulty fuel pressure gauge detected in 2023. The ship has undergone 27 inspections with two noted deficiencies. This recent incident, in March 2024, the collision with the Francis Scott Quay Bridge was due to power outages and equipment failures. The Darlene's owners, grace Ocean Private Limited and the operators Synergy Marine PTE Limited, are currently involved in legal proceedings to limit their liability for the incident. Lloyds of London estimated it would cost them around 3 billion US dollars. The rebuild of the bridge is estimated between 1.7 to 1.9 billion US dollars. The closure of the waterway was estimated at $15 million for every day it was closed.

Tony Hines: 13:31

The timeline of events March 26th, the Dali, the 948-foot cargo ship, struck the Francis Scott Key Bridge in Baltimore, causing a significant part of the bridge to collapse into the Patapsco River and six construction workers were killed and another was seriously injured. March 27th, recovery efforts began, involving the US Army, navy Coast Guard, maryland authorities and specialist private firms such as the salvage recovery firm Donjon. May 14th, the National Transportation Safety Board issued a preliminary report on the incident and this is when they found out the electric faults on the ship and how it became dark and lost steerage. On June 24th, ntsb provided an investigative update noting power outages and equipment failures on the ship. The Dali, power outages and equipment failures on the ship the Dali. In August 2024, maryland Transport Authority approved a $73 million contract for the design and construction of the new Key Bridge. In November 2024, president Joe Biden included funds for the bridge rebuild in a $100 billion disaster fund request to Congress and in December 2024, public hearings were held regarding the reconstruction process. The authorities expect the design of the new bridge to be agreed and in place during 2025, and they expect to start work on the bridge once that's happened, and they hope to complete the new bridge by the fall of 2028. So let's wish them well and hope all goes to plan. So you're about all up to date right now, but we'll keep an eye on this story. An eye on this story Now.

Tony Hines: 15:31

Many small firms in Britain have stopped selling to the European Union and Northern Ireland, which is part of the UK, and it's because of the crazy rules set down by the Brexit agreement. The rules are so complex and they come into effect next week. They're a barrier to growth, so why isn't the UK government dealing with these and sorting it out? They'll apply from the 13th of December. It's called the EU's General Product Safety Regulation, gpsr, and it means small firms have to pay to get their items in transit checked for safe selling. Northern Ireland has effectively remained inside the EU single market for goods after Brexit and, of course, britain isn't, and that's part of the problem. These new obligations are certainly not clear and, for small businesses, just another headache, another cost, another bureaucratic mess and a problem that needs to be sorted so as not to overburden business. If you're really looking for something to do, then if you're a politician or a member of the UK government, this is what you should be sorting out.

Tony Hines: 16:47

These new regulations has to have a responsible person to check the goods which are manufactured outside of the EU or Northern Ireland Effectively. A compliance agent Cost ring a bell here. I can hear the bells going on how safe the products are to be sold. So, yeah, you can sell them inside Britain, but they might not be safe for the EU or Northern Ireland. Well, how crazy is that? And the person who is the compliant agent has to be in the EU or in Northern Ireland. It's just complete madness. Costs reportedly range from £150 to £4,000 per product per year. Yeah, you've got to keep doing it. So if you sell a wide range of goods, you're going to get a big bill.

Tony Hines: 17:35

As a result of this, many small firms have just turned their back on it and said right, that's the end of business in the EU and it's the end of business in Northern Ireland. Well, what a recipe for growth. That is Lots of extra paperwork, bureaucracy, time consuming and cost All the sort of things that small businesses find it difficult to cope with. This is a real barrier to trade and, to add insult to injury, the government guidance on the matter is unclear and not published. So there we have it.

Tony Hines: 18:20

Now there's some of the news about the demand for European gas, and in Europe apparently still don't have the capacity to store the necessary amounts of gas to avoid overpaying for gas, so they can't balance the gas supply with gas demand as evenly as they would like. Eu-wide gas inventories are 85% full, and that's about 10 percentage points lower than a year ago, according to the Gas Infrastructure Europe data, and this is making things quite tight as the cold snaps are biting. Energy prices are lower now than in 2022 and there's also concern around. At the end of the year, the Russian transition deal to supply gas to Europe via Ukraine helped to drive business. Eu gas prices could go up as high as 70 euros per megawatt next year, from nearly 50 euros a megawatt right now. Companies were paying about 17.58 euros per megawatt over the five years before the pandemic, and this could explain some of the other problems experienced in the European Union over the past few years. Nearly a million manufacturing jobs were lost those last four years, according to Bernstein data. It's likely, of course, that fossil fuels are going to be needed for most of the next decade, and even though the energy prices have fallen from the peaks that we saw, the no were near the level that they were previously, and EU companies are facing prices that are about two to three times higher than those in the United States, and natural gas prices are about four to five times higher. So that's a real problem for competitiveness of the European Union and its competitiveness in the global market. French industries expect to operate at about 70-80% of capacity in the winter because of the high energy prices, and that's really impacting the chemical sector. The EU's current storage levels are some 10 billion cubic metres lower than last year, and that gap is bridged by importing LNG, liquefied natural gas.

Tony Hines: 20:45

Gas prices are always in the news these days, and gas supply impacts EU competitiveness. In recent times, the energy landscape in Europe has been under significant strain, with gas prices fluctuating and supply dynamics evolving rapidly. The situation is further complicated by geopolitical tensions and economic policies impacting the energy sector. Here's a comprehensive overview of recent discussions on the topic and its implications for the EU's competitiveness. The end of the Russian gas transit agreement through Ukraine in January 2025 is set to significantly impact gas prices in Europe. Analysts predict that prices could soar to about 70 per megawatt hour, driven by increased demand and tight supply. The spike in prices poses a substantial challenge for European economies, especially those heavily reliant on Russian gas. One way to mitigate the volatility and risk is to manage price volatility by businesses and countries buying forward. These forward contracts allow entities to lock in prices for future supplies and provide a buffer against market fluctuation. The strategy is particularly beneficial in ensuring price certainty, enhancing financial planning and securing future energy supplies, thereby stabilising the economy and mitigating inflationary pressures.

Tony Hines: 22:19

Europe has proactively enhanced its gas storage capacity to cushion against supply disruptions. As of late 2024, the EU gas storage facilities are filled to 90% of their capacity, exceeding the set targets. This proactive measure ensures a buffer during peak demand periods, contributing to the overall energy security of the region While Hungary pays for its gas supplies from Russia in euros converted to rubles. Other EU countries have adhered to traditional payment methods in euros or dollars. This differentiation in payment methods underscores the complex interplay between national strategies and EU-wide policies.

Tony Hines: 23:02

The increasing gas prices, exasperated by the transition agreement's end, have significant ramifications for EU competitiveness. Higher energy costs can lead to increased production costs, impacting the manufacturing sector and overall economic performance. The need for alternative energy sources and enhanced efficiency measures becomes paramount to mitigate these impacts. In summary, the EU faces a multifaceted challenge as it navigates the evolving energy landscape. Strategic initiatives such as leveraging forward contracts, enhancing storage capacities and maintaining cohesive payment policies are crucial. As the EU works towards energy resilience and sustainable growth, these measures will be pivotal in safeguarding its competitiveness on the global stage.

Tony Hines: 23:58

Closing oil prices this week have remained fairly stable against last week. They closed Brent Crude at 72.36 per barrel and West Texan at 67.89, and they were fairly similar last week 72.47 for Brent and 67.67 for West Texas. Well, that's it for this week. I hope you've enjoyed this roundup of all the week's news in global supply chains and see you in the midweek edition. Plenty of episodes for you to catch up on on the Chain Reaction Podcast, some really good episodes recently about artificial intelligence and economic impacts and so on, as well as specialised technical episodes as well, which you may want to take a look at and listen to. So should keep you busy over the weekend. I'll see you next week. Take care, I'm Tony Hines. I'm signing off. I'll see you next time. Bye for now. You've been listening to the chain reaction podcast, written, presented and produced by tony hines.