Economist warns of danger to supply chains from extreme weather and strikes in 2024
Disruption highly likely from labour disputes and weather patterns worsened by El Niño says EIU research
The Economist Intelligence Unit has highlighted the potential for supply chains to be disrupted by extreme weather events and industrial action, giving them both a high likelihood of occurring in 2024.
While it has also labelled these global trends as having a likely moderate impact, it notes that concurrent issues may make these events more problematic.
Firstly, global climate has transitioned into the El Niño weather pattern, which they warn could “lead to record-high global temperatures in 2024”.
While this would most obviously have an effect on crop yields, there are logistical implications as well. Already major droughts have affected some of the world’s most critical transportation waterways, with the Amazon, Mississippi and Rhine all seeing lower than usual levels, leading to some vessels facing restrictions and delays in goods reaching major ports.
Lower crop yields and higher transportation costs have already weighed on a global consumer facing high inflation, as increased commodity costs have fed through to final sale prices “making it harder for poorer households to purchase basic staples”.
This, alongside many currencies falling in value compared to the dollar (in which most commodities are traded), has meant that disposable incomes and living standards for the majority of global workers has diminished, making industrial action more likely.
The report said that, “In an extreme scenario, protests could push workers in major economies and who are employed by large manufacturers to co-ordinate large-scale strikes demanding salary increases that match inflation. Such movements, like those that have affected the automotive industry in the US and key services in the UK (healthcare, ports and railways), could paralyse entire industries or public services for an extended period and spill over to other sectors or countries.”
Additionally, the researchers note that, “These disruptions, combined with geopolitical factors such as the collapse of a grain export deal between Russia and Ukraine, could put higher than expected operational stress on commodity dependent industries, including agriculture, mining and manufacturing.”