by Michael Snyder
"The closure of the Strait of Hormuz has created a global supply chain nightmare that is unlike anything that we have seen before. As existing inventories and reserves of various resources are depleted, the consequences of this global supply chain nightmare will become more apparent. Asia is being hit the hardest, because Asia is much more dependent on commodities that are exported through the Strait of Hormuz than anyone else. In fact, the crisis in the Middle East is causing a shortage of Diet Coke in India right now. I never imagined that I would be writing about a shortage of Diet Coke in India in the middle of 2026, but this is how crazy things have become.
Experts are warning that next month is likely to be a major tipping point for global supply chains… "JP Morgan commodities analyst Natasha Kaneva warned in a note last week that oil inventories have acted as a “shock absorber” for the global economy. But it could reach “operational stress levels” across the OECD group of industrialized countries as soon as next month. As well as oil and gas, experts are warning about rising prices and supply constraints for fertilizer, metals such as aluminum, and several chemicals that are crucial to modern manufacturing."
In previous articles, I have written much about what the closure of the Strait of Hormuz means for the oil, natural gas and fertilizer markets. Of course many others have also been talking about oil, natural gas and fertilizer. But what a lot of people out there do not realize is that a significant portion of the world’s aluminum also comes out of the Middle East…
"The Middle East’s access to cheap, abundant power is part of what has made it a hub for global aluminum production over the past few decades. Aluminum is derived from a reddish mineral called bauxite. The process of refining and smelting the stuff requires an immense amount of energy, so facilities tend to be located in places where it makes financial sense to do so. When Iran began restricting ship traffic through the Strait of Hormuz, Gulf plants struggled to both import raw materials and export pure aluminum. Facilities in Qatar and Bahrain reacted to the uncertainty by shutting down smelters. Then, on March 28, Iran’s Islamic Revolutionary Guard Corps launched drone and missile attacks on two aluminum facilities in the region; the Al Taweelah plant in Abu Dhabi, which was responsible for making 1.6 million tons of the metal last year, has since been completely shut down. Those strikes led to a hold on about 3.2 million tons of the world’s aluminum - and a strain on economies, such as India’s, that draw from that supply."
Asia imports more aluminum from the region than anyone else. Now that the Strait of Hormuz is closed, this is creating a major problem for Diet Coke drinkers in India, because Diet Coke only comes in aluminum cans in that nation… But the shipping logjam in the Persian Gulf is also having unexpected impacts. In India, shops have struggled to keep Diet Coke on the shelves due to a shortage of aluminum cans.
Suppliers told the Reuters news agency that some orders were not being fulfilled due to a can shortage caused by the situation in the Gulf, which accounts for around 9% of global aluminum production. Diet Coke is not sold in plastic bottles in India, unlike most other countries, leaving fans of the drink at risk of losing out.
When something starts to get scarce, all of a sudden it becomes highly valued. Just think about what happened during the early days of the last pandemic. When people started hearing reports that toilet paper was being hoarded, all of a sudden there was a mad scramble and people were filling up their entire shopping carts with it. Well, a similar thing is taking place in India.
Diet Coke addicts are scrambling to secure what they will need for the months ahead, reports of empty shelves are everywhere, and tickets to a “Diet Coke party” were completely sold out…"For Gupta, a 25-year-old marketing and design consultant based in New Delhi, it was an opportunity for fun, so she decided to throw a party celebrating the drink. “It was a joke,” said Gupta, describing herself as an “avid drinker” of Diet Coke. “I thought only me and two of my friends would show up.”
The party was a hit with Gen Zers, who she says are craving more alcohol-free experiences. Tickets were sold out, and attendees showed up wearing Coke-themed outfits, danced to house and pop music, and made their own Diet Coke “concoctions” inspired by Dua Lipa’s recipes. The pop star has posted videos on TikTok in which she adds pickle juice and pickled jalapeños to the drink."
Personally, I don’t understand why anyone would drink Diet Coke. To me, it tastes horrible. But there are millions upon millions of people out there that absolutely love the stuff. Of course Diet Coke will not be the only thing that is in short supply during the months ahead. Supplies of oil, natural gas, fertilizer, helium, plastic and many other important commodities will get tighter and tighter.
Over the past couple of months, we have been running through existing inventories and reserves. But now the reality of what we are facing is starting to set in, and we are being warned that what we have experienced so far “may be only a foretaste of what is to come”…The longer the waterway remains closed, the more emergency stocks of oil and other vital commodities are run down, with knock-on effects across the economy. Even if the channel were to reopen fully tomorrow it could take months for supply chains to return to normal. More and more companies are having to acknowledge the possibility that vital inputs will run out. Some executives and analysts fear such reports of disruption and scarcity may be only a foretaste of what is to come.
The Iranians are making it exceedingly clear that they will simply not allow commercial traffic to flow freely through the Strait of Hormuz like it did before the war. So either the rest of the world will have to adapt and built new infrastructure and new facilities elsewhere, or the rest of the world will have to try to force Iran to give up control of the Strait of Hormuz.
Either option would require a great deal of time. Unfortunately, the global economy is running out of time because extremely severe supply chain disruptions are right around the corner."
No comments:
Post a Comment