How climate change is disrupting the global supply chain

• Late July flooding in central China disrupted supply chains of commodities like coal, pigs and peanuts^⁠A Nissan automobile plant was closed due to the disruptions. 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 is the fifth-costliest hurricane in American history^⁠In late August, a hurricane ravaged the Gulf of Mexico Coast, causing severe damage to vital industrial installations^⁠These products include plastics, pharmaceuticals, and a diversion of trucks for relief aid.

• Fires in British Columbia from late June through early October triggered by an unprecedented heat wave 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 flooding destroyed important railroad and highway infrastructure.^⁠ links to Canada’s largest port and forced a regional oil pipeline^⁠The station will be closed. The loss of the rail network caused provincial lumber companies to reduce their production, leading to price increases and shortages in lumber, paper pulp, as well as other wood products, in the United States.

• A typhoon in December caused what? TechWireAsiacalled^⁠ “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 U.S. companies and consumers. The global shortage of semiconductors was caused by the packaging failure, which led to some U.S. auto manufacturers having to cease operations.

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

Scientists predict that climate-related disruptions will increase as the world heats. In addition, ports, rail lines, highways, and other transportation and supply infrastructure will be threatened by increases in sea level of an estimated 2 to 6 feet — 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^⁠The wharves of coastal ports are located just a few feet to fifteen feet above the sea level. The threat to port managers still feels remote. Future sea level rise rates are so uncertain^⁠Solutions so difficult that only a few can find them^⁠Only a few port managers have attempted to assess the threat and have taken action to mitigate 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 said. The leap in the cost of shipping a container across the Pacific Ocean as a result of the pandemic — from $2,000 to $15,000 or $20,000^⁠ — may suggest what’s in store.

2020 paper^⁠In Management and Policy for the Maritime Industry 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 afterwards.

Not all experts agree that supply chains are highly vulnerable due to climate change. “I don’t lie awake at night thinking about what will happen to supply chains because of climate,” said 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 basically strings of potential bottlenecks. Each stopping point is a node in a tree-like 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 said. 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 weakest link in the chain.

Particularly vulnerable are seaports. Experts say there are three options available to port authorities to deal with sea level rise. They can choose to retreat to inland locations that have river connections to the oceans. However, these sites are scarce and expensive. They can build expensive sea dikes around ports. However, even if they are strong enough to withstand rising oceans, they must be constantly raised to keep up with sea levels. This will only buy time before being overtopped. They also divert floodwater from areas near the coast that are not protected by the dikes.

Finally, port officials have the ability to raise at least a few meters all port infrastructure so that it can continue functioning as sea level rise proceeds. Becker said that the rate at which the sea level rises is so unpredictable, it is difficult to decide on a cost-effective height. Even if wharves were raised and other port infrastructure was built, it would still leave the area 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 2 meters (6.5 feet) 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 metric tons — alone would cost $60 billion in 2022 dollars. Another study that Becker co-authored in 2017 found that elevating the infrastructure of the 100 biggest U.S. seaports by 2 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.”

“We’re a rich country,” Becker said, “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 Journal of Waterway, Port, Coastal, and Ocean EngineeringBecker co-authored a survey which found that only 29 per cent of 85 U.S. marine infrastructure engineers responded to a survey. Only 29 percent had even thought about creating a sea rise plan or document. The federal government does not offer any guidance on how to incorporate sea level rise projections in port design. “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. American companies could cut down their supply chains by shifting production facilities to the U.S., or a nearby country. But in many cases they would be removing the factories from the cluster of suppliers that grew up around their factories in countries like China or 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, said in an interview. “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.”