Turkey-Syria earthquake hits fashion supply chains – and four more updates from global freight

Mon 20 Feb 2023
Posted by: Richard Cree
Trade News

International supply chains are continually caught up in in global events, whether that’s geopolitics or the impact of international disasters.

The IOE&IT Daily Update here looks at five key stories from around the world that are impacting global trade.

Turkish earthquake hits fashion supply chains

The recent tragic earthquakes in Turkey and Syria have caused major devastation to the people of both countries.

They have also affected major fashion companies, according to Reuters, many of which have sought to diversify their supply chains into Turkey. Around 500 apparel factories are in the earthquake region, handling manufacturing for several high-profile clothing brands including Levi Strauss, Mango, Hugo Boss and Zara.

The Ekonomi newspaper reported that hundreds of textile plants in Kahramanmaras have halted operations, adding that it may take as long as six months to restart production.

Reuters reports data from the European Bank for Reconstruction and Development (EBRD) showing that the disaster, which has claimed around 40,000 lives so far, could take around 1% off Turkish GDP.

Nearshoring benefits Mexico

International companies are increasingly relocating supply chains to Mexico, Latin America’s second-largest economy.

Industrial park occupancy in the country hit a record high last year, as the sector grew 30% on 2021 and registered an average occupancy rate of more than 97%. The expansion was driven in part by the automotive sector, including the manufacturing of electric cars, reports Bloomberg.

Speaking at last month’s North American Leaders’ Summit, Mexican foreign minister, Marcelo Ebrard, said that Mexico’s goal is for the three NAFTA countries (Mexico, US and Canada) to substitute at least 25% of Asian imports over the next few years.

Such “nearshoring” could generate a $35bn increase in US-bound Mexican trade, reports S&P Global.

The countries announced a semiconductor industry forum during the first half of 2023 to boost investment in the sector within the region, further bolstering Mexico’s potential role.

According to Reuters, steelmaker Ternium is considering building a new $2.2bn production plant in northern Mexico to comply with regulations for carmakers that at least 70% of the steel used in vehicles must be “melted and poured” in the region from 2027.

Europe cuts lorries slack

New near zero” rules on CO2 emissions from the European Commission have given the makers of HGVs more time to reduce pollution than those manufacturing and selling cars.

The rules will require new trucks by 2040 to cut emissions by 90% and all new city buses to have zero emissions from 2030. New cars have to be CO2-free by 2035, reports Reuters.

According to the FT, seven of Europe’s largest truck makers have pledged to stop selling vehicles that produce emissions by 2040.

The industry has argued that lorries are harder to decarbonise than cars because their heavy loads and long distances means that battery power is less suitable than for lighter vehicles.

Shipping costs down

The price of shipping goods has fallen 85% from its peak, as the cost-of-living crisis hits consumer spending and pandemic-related supply chain disruption eases, reports the FT.

Delays and queues, which hit ports at the height of the pandemic, have also dissipated. Shipping group Maersk predicts that demand for containers will fall by 2.5% this year.

But with many clients on long-term contracts, the shipping groups are likely to retain the benefits of higher rates for at least the current quarter, before new agreements reflect the decline in rates.

Shippers are also attempting to restrict capacity to maintain prices, Simon Heaney, senior manager of container research at Drewry Logistics, told Supply Management.

Lufthansa hit by IT problems and unrest

On Wednesday, Lufthansa Cargo placed a stop on all bookings for cargo shipments to and from Frankfurt and Munich due to IT outage, when cables were damaged during works, reports Air Cargo News.

Frankfurt Airport closed for arriving flights and the cargo carrier initially stopped accepting freight shipments at Frankfurt and Munich airports before measures were resolved later that day.

All Lufthansa Cargo flights already on their way to Frankfurt were diverted to other German airports, according to the Loadstar.

CNN reports that on Friday the airline had already cancelled more than 1,300 flights after the Verdi trade union called for full-day strikes involving airport workers at seven German airports, including Frankfurt, Munich and Hamburg.