The impact of the German economy on the supply chain

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The largest European economy is slowing down. This will have an impact on supply chains and manufacturers in developing countries.

The world’s third-largest supplier and Europe’s largest economic powerhouse, is slowing down. It is still too early to talk about a German crisis although experts are noticing the first signs of one. In the spring of this year, the Federal Bureau of Statistics released foreign trade results. These served as an important warning signal. For the first time in 30 years and to the surprise of experts and the business community, a shortfall in foreign economic turnover emerged.

Germany’s biggest oil refinery had to cut production at its Rhineland facility because of low Rhine levels, underscoring the seriousness of the logistics crunch along a key inland route for industrial materials.

The majority of goods are transported by truck in Germany but, highways and bridges have been underfunded year after year. Freight transport is heavily reliant on connections between roadways, rail lines, and ports.

Germany’s rail networks are in historically bad shape as staff shortages, investment shortcomings, and construction sites are slowing down carriers, the German Freight Forwarders Association said.

According to the German Coal Importers Association, as Germany prepares to import 35 million tons of coal this year, up from 27 million tons in 2021, freight trains are unlikely to compensate for barges if the Rhine must close for shipping. Trains carry far fewer passengers than barges, making them more expensive for buyers.

Germany is also a large market for not only finished products, but also energy raw materials, metal ores, and components for industrial production. And this is where the German economy’s problems begin. One of the primary reasons for its slowing is the conflict in Ukraine, which has disrupted critical supply chains. The energy crisis caused by the disruption of Russian oil and gas supplies is, of course, a significant challenge for the German locomotive.

Read more about how digitalization is strengthening the supply chain

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