Auquan's Weekly Wrap | 20 - 26th August: What you might have missed
Recap of the week's market activity: impacts of the China Drought, supply chain diversification and soy unethical sourcing concerns...
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China Drought: Power Outages & Production Suspensions
Auquan's local coverage has been tracking ongoing developments from the severe droughts affecting China. Sichuian for example, relies on 80% of its power from hydroelectricity and is currently experiencing major power outages. The area plays a key role in supply chain of lithium salts and polysilicon, electronic devices, copper and aluminum - all suffering from supply constraints, as several companies provide updates on production activity.
- China's high temperature and drought cause power shortages in southern cities such as Shanghai
- It's not easy to "evenly" electricity to Sichuan and Chongqing
- Three major factors of power shortage in Sichuan that sacrificed oneself to send electricity
- China's power crisis could reach a Himalayan scale
- The extension of power cuts in Sichuan will further expand the impact on the semiconductor industry chain
- China Lithium Prices Near Record; power outages strain the market
- China drought causes Yangtze river to dry up, sparking shortage of hydropower
Global Supply Chain Diversification From China
Deepening worries about the disruptions and future impacts of US China tensions, COVID lockdowns and now an indefinite power cut in many key manufacturing hubs have prompted companies to explore alternative options in their supply chain, diverting away from China. Carmakers Honda and Mazda are both looking to reduce their dependance on the country, with Apple's investment in manufacturing outside of China also following suit. Vietnam, India, and Mexico are poised to reap the benefits - Mexico is already attracting major investments from Mattel and Chinese battery maker CATL for new factories.
- Apple, Honda, and Mazda reportedly consider diversifying manufacturing away from China after supply-chain chaos
- Japan's Honda Says China Plant Remains Shut as Power Cuts Are Extended
- Honda considering decoupling supply chain from China
Soy Unethical Sourcing Concerns
Bunge and Cargill, two of the world’s biggest grain traders are sourcing soy from a Brazilian farm linked to abuses of indigenous rights and land, a report from the environmental group Earthsight claims. “Our investigation demonstrates how Cargill’s irresponsible indigenous rights policy and Bunge’s questionable traceability of indirect suppliers, expose their supply chains to illegalities and violent conflict, despite their stated commitments on human rights.” Whilst Cargill confirmed it bought soy from Brasília do Sul, Bunge has refused to say whether it sourced soy from the farm.
- Leading grain traders sourcing soy beans from Brazilian farm linked to abuse
- Commodity kings Cargill, Bunge buying soy from stolen Indigenous land
US Arms Manufacturers: Mexican Lawsuit
Last years Mexican government lawsuit is unfolding with further pressure being placed on arms companies through shareholder activism focused on the business risks of continuing gun violence. Estimates of damage are approximately $10bn and is against 10 US gun manufacturers and distributors -seeking damages from the companies for negligence leading to Mexico’s devastating rate of gun homicides and violence.
- US arms companies under pressure from Mexico lawsuit 13 states have backed
- The Mexican government's lawsuit against a group of US gun manufacturers
Royal Mail Worker Strike
An 100,000+ employee walkout has started today, as the Communication Workers Union (CWU) said its members are taking industrial action for a “dignified, proper pay rise” after they voted in favour by 97.6 per cent in a ballot. CWU general secretary Dave Ward said: “On Friday, we will see a tremendous outpouring of workers’ unity in villages, towns and cities across the country.” A Royal Mail spokesperson has also said “customers should expect significant disruption.” With previous strikes earlier in the year, potential impacts to SMEs, E-commerce and logistics businesses could be worse.
- Royal Mail warns postal worker strike on Friday will cause 'a significant disruption' to services in Northern Ireland
- 100,000 Royal Mail workers to walk out over pay in 'summer's biggest strike'
- Royal Mail warns that UK postal service will be 'materially loss making' if strike goes ahead
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