Blurred Supply Lines

2 Jul

The recent movement towards more on-shoring of production as well as the recent explosion in global tensions across a number of borders has gotten us thinking about the security of the global commodity supply chain. Whether it is the Mideast or Asia or Eastern Europe, we are suddenly faced with multiple flash points in what traditionally have been fairly  stable regions (Mideast excluded). Combine these tensions with a general global shift towards protectionism, and we could see the focus of commodity purchasing mangers shift from price, to availability of supply at any price. The composition of global trade over the past 15 years has occurred against the backdrop of a benign political and social environment. This  subsequently has afforded commodity end users the luxury of longer, more responsive global supply lines. However, in a post crisis world, there have been several important shifts which potentially threaten the accommodative nature of the existing supply chain. One shift has been the emphasis on the part of producers to produce more profitably coincident with their inability to tap global capital markets. Another important shift has been the move towards resource nationalism with countries impeding the export of raw materials in favor of providing more value added at the country level (Indonesia, South Africa, etc.). Both of the aforementioned have the combined affect of reducing the availability of supply. Juxtapose these developments against the climate that exists on the political and geo-political fronts and we feel we have the beginnings of what could be a new worry: availability of supply at a reasonable price. Buy Stuff and maybe some warehouse space

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