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In this episode, Kasey shares her favorite Gmail hacks and features to help teachers save time and make the most of this robust tool. Let’s get organized, save time and frustration, manage annoying emails, and get to what’s important. For every Gmail user, this episode is bound to give you some great ways to cleanContinue Reading
With conflict in Ukraine comes more reminders of the
fragility of the world's automotive supply chains. The March light
vehicle production update from S&P Global Mobility (formerly
the automotive team at IHS Markit) is likely to downgrade its 2022
forecast by 2.6mn units (i.e. to 81.6 million). The downgrade
decomposition will broadly comprise just under 1mn units from lost
demand in Russia and Ukraine; and the remainder split between 1)
worsening semiconductor supply issues, and 2) loss of
Ukraine-sourced wiring harnesses and other components respectively.
In addition, the complete loss of Russian palladium is a tail risk
with the potential to become the industry's biggest supply
constraint.
Pent-up demand reduced by roughly one
third
Pre-Ukraine invasion on 24th Feb, the global auto industry had
already spent over a year under capacity constrained conditions,
with (we estimate) pent up consumer demand up to 10mn units (or
12%) above this year's achievable production. The sudden loss of
economic confidence (via high oil and raw material prices, weak
equity markets, and tightening interest rates) is dampening demand,
and could now reduce that shortfall by roughly one third - though
significant pent-up demand remains.
Supply chain remains the constraining
factor
While the macro concerns are significant, the supply chain (and
not underlying consumer demand) will continue to set the
upper limit for vehicle unit sales in the medium term. The key
crunch points weighing on production levels post invasion fall into
two broad categories: Semiconductor materials
supply (specifically via Ukrainian neon and Russian palladium), and
electrical wiring harness sourcing.
Specialist material outages could curtail semiconductor
recovery
Semiconductor supply challenges are worsening on two fronts:
First, via neon gas supply disruptions. Ukraine's
firms control around half of high purity neon supply to the
semiconductor industry, where the element is used in lasers that
etch patterns onto chips. Our channel checks suggest immediate
risks are low thanks to semiconductor makers holding sufficient gas
inventory, but visibility is poor. The second challenge is
availability of palladium, used in semiconductor
plating and finishing. In an additional negative twist, China
COVID-19 cases at a 2 year high are triggering
quarantines and plant closures in northeastern manufacturing hubs
including Shenzhen and Changchun. All of the above raise the risk
of losses from 'stranded' chips, i.e.
semiconductors for which the 'right' car cannot be built due to
other constraints.
Ukraine wiring harnesses difficult to
substitute
Our channel checks suggest Ukraine-built wiring harnesses were
likely destined for around 0.5 to 1mn vehicles pre-invasion. These
harnesses comprise complex and manually constructed assemblages of
cable. Although some dual sourcing arrangements exist, for the most
part switching will be difficult due to
already-constrained harness capacity in and around Europe.
Production relocations could take 3-10 months due to wait times on
machinery and multi-month staff training times. Almost half (45%)
of Ukraine-built wiring harnesses are normally exported to Germany
and Poland, placing German carmakers at high
exposure. Our analysis suggest Opel (i.e. Stellantis via
Leoni), VW (via Leoni and Sumitomo) are over-exposed versus peers.
On the plus side, once ramped up - lost production could be
recovered quickly into late 2022 and beyond.
Palladium: Next 'black swan' candidate
While low probability as things stand, palladium has the
potential to become the industry's biggest supply
constraint. Russia produces 40% of the world's mined
palladium according to USGS. Around two thirds of palladium use is
in vehicles, where it is the active element in catalytic converters
for exhaust aftertreatment. If Russian palladium supply were
suddenly interrupted (due to a western boycott, or Russia stopping
supply), production of all vehicles using such sourcing (including
hybrids) could potentially stop. Although platinum is an
alternative element, it is similarly expensive and also largely
Russia-originated. Substitution of any kind is a regulatory
minefield since design changes require regulatory re-homologation,
which can take months. We do not currently incorporate
major palladium disruptions in our forecast base case.
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The Biden administration announces ban on import of Russian energy commodities and prohibition on new investment in the Russian energy sector
New General License provides wind-down period until April 22, 2022 for certain energy imports from Russia pursuant to agreements entered into before March 8, 2022
EU and UK expand their sanctions programs against Russia and Belarus, including additional sanctions on oligarchs
FinCEN issued an alert to all financial institutions to be vigilant against efforts to evade the expansive sanctions and other restrictions imposed in connection with the invasion of Ukraine
