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Weekly Roundup - Baltimore Bridge Collapse, German Economy Recovery and €23 Billion Green Experiment

Yulia Fedorova

28 Mar 2024

A container ship named Dali crashed into the Francis Scott Key Bridge in Baltimore, causing it to collapse, leading to fears of significant disruption to global supply chains. The port of Baltimore, a major hub for car exports and the shipment of liquefied natural gas, has suspended maritime traffic, affecting over 47 million tonnes of foreign cargo. This suspension is expected to have a ripple effect on global supply chains, impacting major US, UK, and EU brands. The incident has prompted Danish shipping giant Maersk to omit Baltimore from its services, with several rail and coal companies warning of disruptions to coal exports. The port directly supports thousands of jobs, and the US government has pledged to reopen the port and rebuild the bridge. The cause of the crash is attributed to a power issue on the ship, and a recovery mission is underway to investigate and clear the channel. The ship's certificates and inspections were reportedly valid at the time of the incident.

The Kiel Institute for the World Economy has downgraded its economic growth forecastfor Germany, predicting only a 0.1% increase this year, a significant drop from the previously anticipated 1.3%. For the following year, the forecast remains almost the same at 1.4% growth. Germany experienced a decline in economic output by 0.3% in 2023, with productivity described as stagnant. Factors contributing to the sluggish economy include less dynamic private consumption, a decrease in exports despite global economic growth, and a downturn in the construction sector. A recovery is expected starting in the spring, but it is not predicted to be robust. Political uncertainty is affecting companies' willingness to invest, with disagreement between Finance Minister Christian Lindner and Economy Minister Robert Habeck on a growth package. The German Chamber of Industry and Commerce reports a continued negative economic sentiment due to high energy costs, a growing shortage of skilled workers, and geopolitical uncertainties impacting exports. Inflation rates, which had been very high, are expected to ease, with a projected rise in consumer prices of 2.3% this year and 1.8% the next year.

Germany is running a €23 billion experiment to reach net zero by 2045 without destroying its energy-intensive industrial base. Olaf Scholz's government introduced "climate protection contracts" to assist sectors like steel, cement, and glass in covering extra costs for using cleaner technologies. Companies submit proposals indicating the support they need. Those offering the most substantial CO2 reductions at the lowest cost receive funding. The initiative resembles Contracts for Difference used for renewables but covers a broader range of technologies, making its outcome uncertain. The first auction offered up to €4 billion in contracts, with a subsequent €19 billion auction planned for the summer. It is considered an innovative approach not seen internationally. Other nations with net zero goals are monitoring the program. The US announced similar grants for reducing emissions in various industries. Backing early-stage technologies like carbon capture and hydrogen-powered recycling is riskier than supporting established clean energy solutions. The German government emphasizes protecting its industrial economy and securing jobs, reserving auctions for domestic companies and learning from past investment mistakes in the solar industry.

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Dive deep into research

"Adapting to disruptions: Managing supply chain resilience through product rerouting" by Ambra Amico, Luca Verginer, Giona Casiraghi, Giacomo Vaccario, Frank Schweitzer (2024)

"Supply chain disruption recovery strategies for measuring profitability and resilience in supply and demand disruption scenarios" by Yaru Li, Yanhong Yuan (2023)

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