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Tuesday, 10 March 2020

Signs of supply shocks in Egypt amid covid-19 disruptions

Signs of supply chain disruption in Egypt: Egypt’s supply of consumer electronics and sanitary ware is being hit by China’s manufacturing woes, leading to expectations of a new wave of consumer price hikes, the local press reports, quoting several business leaders.

As Chinese component makers fail to make deliveries amid factory shutdowns, local electronics assemblers have started cutting production and holding excess stock in anticipation of higher prices. This is expected to lead to a supply shortage and cost-push inflation in the market by no later than early April, B-tech Chairman Mahmoud Khattab said. The price of television sets and refrigerators could increase by 3-5%, Emad Ragab, who leads the sales team at another major electronics producer, says.

Importers and retailers of sanitary ware and plumbing fixtures are also feeling the pinch, suggesting cost-push inflation has led prices to increase by 10-20% since the outbreak erupted. Egypt imports up to 80% of its sanitary ware needs from China and produces virtually none, head of the plumbing and sanitary wares division of the Cairo Chamber of Commerce Matta Bishay said. And even if we pivot to manufacturing, which Bishay said his division is currently working to promote, local producers will still have to rely on Chinese copper imports, an issue that Gamal El Shahawy, chairman of sanitary ware importer Horus Trade, points out.

Why has the world become so dependent on China? There’s no better way to drive this point home than stressing that, as the Wall Street Journal eloquently says, “China’s shadow has grown so long that even industries that have shifted production … can’t wriggle [out] of its grip on supply networks.” The problem will persist so long as the epidemic does. This is because factories all around the world are now desperately expending resources in the search of supply chain alternatives.

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