Climate Change Will Make Supply Chain Woes More Serious

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Global supply chain disruptions in the last two years have been largely attributed to the COVID-19 pandemic. Experts and scholars say that the more serious threat to supply chains from climate changes is less well-known and is already being felt.

The pandemic is “a temporary problem,” while climate change is “long-term dire,” says Austin Becker, a maritime infrastructure resilience scholar at the University of Rhode Island. “Climate change is a slow-moving crisis that is going to last a very, very long time, and it’s going to require some fundamental changes,” says Becker. “Every coastal community, every coastal transportation network is going to face some risks from this, and we’re not going to have nearly enough resources to make all the investments that are required.”

Of all of climate change’s threats to supply chains, sea level rise lurks as potentially the biggest. But, even though sea level rise is already threatening ports and other infrastructure along the coast, disruptions to supply chains due to hurricanes, floods and other extreme weather are disrupting the global economy. A sampling of these disruptions from just last year suggests the variety and magnitude of climate change’s threats:

• The Texas freeze last February caused the worst involuntary energy blackout⁠ in US history. That forced three major semiconductor plants to close⁠, exacerbating a global pandemic-triggered semiconductor shortage and further slowing production of microchip-dependent cars. Railroad closures were also required due to the outages, which cut off crucial supply chain links between Texas & the Pacific Northwest for three consecutive days.⁠
• Heavy rainfall and snowmelt last February caused some banks of the Rhine River, Europe’s most important commercial waterway, to begin to burst, triggering a halt in river shipping for several days. In April, the Rhine’s water levels dropped to such an extent that cargo ships could not load more than half of their normal capacity to avoid going aground. In recent years, manufacturers relying on the Rhine “have increasingly faced shipping capacity reductions that disrupted both inbound raw material and outbound product delivery flows” as a result of drought, according to a Everstream Analytics May 2021 ReportThe, which tracks supply chain trends.
• Flooding in central China in late July disrupted supply chains for commodities such as coal, pigs, and peanuts⁠, and forced the closure of a Nissan automobile plant. SAIC Motor, the country’s largest automaker, announced that these disruptions caused what Reuters called a “short-term impact on logistics” at its giant plant in Zhengzhou, capable of producing 600,000⁠ cars a year.
• Hurricane Ida, the fifth-costliest hurricane in US history⁠, struck the Gulf of Mexico coast in late August, damaging vital industrial installations⁠ that generate an array of products, including plastics and pharmaceuticals, and forcing a diversion of trucks, already in short supply across the country, for use in relief aid.
• Fires in British Columbia from late June through early October triggered by an unprecedented heatwave comprised the third-worst wildfire season in the province’s history and closed a transportation choke point at Fraser Canyon that idled thousands of rail cars and stranded their contents. Then, in November, an atmospheric river, delivering what officials called “once-in-a-century” rainfall, caused severe flooding in the province. The floods severed crucial railroad and highway⁠ links to Canada’s largest port and forced a regional oil pipeline⁠ to close. The loss to the rail network forced provincial lumber firms to cut back production, resulting in price increases and shortages.
• A typhoon in December caused what? TechWireAsia called⁠ “arguably the worst flooding in history in various parts” of Malaysia, and severely damaged Klang, Southeast Asia’s second-largest port. That created a break in the semiconductor supply chain, since semiconductors from Taiwan, by far the world’s largest manufacturer of advanced microchips, are routinely shipped to Klang for packaging at Malaysian factories before being transported to US companies and consumers. The global shortage of semiconductors was caused by the packaging failure, which led to some US automobile manufacturers having to cease operations.

Shipping containers were left in floodwater at Riesa Harbor, Germany. Photo by Thomas Peter/Reuters/Alamy Stock Photo

“The Malaysia node in the global supply chain that hardly anyone was aware of turned out to be critical,” Christopher Mims, a Wall Street JournalTechnology columnist and author of Arriving Today: From Factory to Front Door—Why Everything Has Changed About How and What We Buy, says. “It illustrates how a bottleneck anywhere in the supply chain can interfere with the availability of critical goods.”

Scientists believe that these climate-related disruptions will only get worse as the world warms. In addition, ports, rail lines, highways, and other transportation and supply infrastructure will be threatened by increases in sea level of an estimated 60 to 180 centimeters —and perhaps more—by 2100. Around 90 percent⁠ of the world’s freight moves by ship, and, according to Becker, inundations eventually will threaten most of the world’s 2,738⁠ coastal ports, whose wharves generally lie just above sea level to as high as 4.5 meters. However, most port managers still feel the threat is remote. The rate of future sea level rise is so uncertain⁠ and solutions so elusive that only a few⁠ port managers have taken action to counter the threat, and only a fraction have tried to assess it.

As the ripple effects of what are likely to be ever-increasing and intensifying climate-related disruptions spread through the global economy, price increases and shortages of all kinds of goods—from agricultural commodities to cutting-edge electronics—are probable consequences, Mims says. The leap in the cost of shipping a container across the Pacific Ocean as a result of the pandemic—from US $2,000 to $15,000 or $20,000⁠—may suggest what’s in store.

A 2020 paper⁠ in Maritime Policy and Management even asserted that if current climate science is correct, “global supply chains will be massively disrupted, beyond what can be adapted to while maintaining current systems.” The paper argues that supply chain managers should accept the inevitability of economic upheaval by the end of this century and embrace practices that support rebuilding afterward.

However, not all experts believe that supply chains are extremely vulnerable to climate change. “I don’t lie awake at night thinking about what will happen to supply chains because of climate,” says Yossi Sheffi, director of the Massachusetts Institute of Technology’s Center for Transportation and Logistics and the author of numerous books about supply chains. “I think supply chain disruption is usually local and limited in time, and supply chains are so redundant that there are many ways to get around problems.”

Supply chains are, in essence a string of potential bottlenecks. Each stopping point is a node in a treelike system that conveys raw materials from the system’s farthest tendrils to sub-assemblers along its roots to manufacturers, who are the system’s trunk. Products like smartphones possess hundreds of components whose raw materials are transported from all over the world; the cumulative mileage traveled by all those parts would “probably reach to the moon,” Mims says. These supply chains are so complicated and opaque that smartphone manufacturers don’t even know the identity of all their suppliers—getting all of them to adapt to climate change would mark a colossal achievement. Each node is vulnerable and could be the beginning of a chain that sends dangerous ripples down the chain.

Particularly vulnerable are seaports. Experts say that port authorities have three options to cope with rising sea levels. They can retreat to inland areas with river connections to oceans, but these locations are rare and costly. They can build expensive sea walls around ports. However they must constantly be raised to keep up the rising sea level. They also divert floodwater from areas near the coast that are not protected by the dikes.

A Belle Chasse oil refinery was flooded by Hurricane Ida on September 3, 2021. Photo by PO2 Ryan Dickinson/US Coast Guard/Alamy Live News

Finally, port officials can raise the minimum height of all port infrastructure by at least two meters to ensure that it can continue to function in the event of sea level rise. Becker states that the rate of rise is so unpredictable that it is difficult to choose a cost-effective height. And raising wharves and other port infrastructure would still leave unprotected⁠ ports’ vital ground transportation links—railroads and highways—and, for that matter, the residents of adjoining cities.

In a 2016 paper⁠ in Global Environmental Change, Becker and four colleagues concluded that raising 221 of the world’s most active seaports by two meters would require 436 million cubic meters of construction materials, an amount large enough to create global shortages of some commodities. The estimated amount of cement—49 million tonnes—alone would cost $60-billion in 2022 dollars. Another study that Becker coauthored in 2017 found that elevating the infrastructure of the 100 biggest US seaports by two meters would cost $57-billion to $78-billion in 2012 dollars (equivalent to $69-billion to $103-billion in current dollars), and would require “704 million cubic meters of dredged fill … four times more than all material dredged by the Army Corps of Engineers in 2012.”

“[The United States is] a rich country,” Becker says, “and we’re not going to have nearly enough resources to make all the required investments. So among ports there’s going to be winners and losers. I don’t know that we’re well equipped for that.”

Seaport managers have not been able to address the threat because of the long-term nature of sealevel rise and the inexpensiveness of the solutions. A 2020 study is available. Journal of Waterway, Port, Coastal, and Ocean EngineeringBecker’s survey found that only 29 percent of 85 US maritime engineers responded to a survey that asked them if they had any sea level rise planning documents or policies. Additionally, the federal government doesn’t offer any guidance regarding how to incorporate sea-level rise projections into port designs. “This leaves engineers to make subjective decisions based on inconsistent guidance and information,” the study said, and “leads to engineers and their clients disregarding [sea level change] more frequently.”

In response to the threat of increasing supply chain disruption, manufacturers are considering enlarging their inventories or developing “dual supply chains”—supply chains that deliver the same goods via two different routes, so that if one breaks down, the other will prevent shortages. But both solutions would increase production costs, and would contradict the still-predominant “just-in-time” manufacturing approach, which relies on robust supply chains to eliminate the need for companies to keep extensive parts inventories in stock. US companies could reduce their supply chains by moving production facilities to the United States or another country. However, in many cases, they would be removing factories from the network of suppliers that grew around them in countries like China and Vietnam.

On top of all this, there’s a built-in inertia in supply chain management. “[Long-term] strategy and logistics are opposite things,” Dale Rogers, a business professor at Arizona State University, says. “Logisticians are always trying to execute the strategy but not necessarily develop it. They’re trying to figure out how to make something happen now, and climate change is a long-term problem.”