Moving into 2024, GDP in Europe is forecast to grow by around 1%. This coupled with seemingly stable UK interest rates (5.25% held since August 2023), dropping mortgage rates and possible slowing of inflation is a positive sign for the UK with anticipation building that the Bank of England will soon reduce interest rates. Despite this, the European Central Bank is not forecast to make significant rate cuts in the immediate future.
Up to 80% of container ships have been re-routed from their usual Suez Canal journey around the Cape of Good Hope due to the ongoing and escalating Red Sea crisis, with Houthi attacks on cargo ships and tankers becoming an increasing risk since tensions rose in October targeting Israeli vessels. The re-routing adds up to 2-weeks transit time and 6,000 miles of each routed ship, and increasing costs up to 300% or more since last year.
In addition to this disruption, the Panama Canal connecting the Atlantic and Pacific Oceans for sea freight is also on the horizon of its own crisis. The drought began last year, which is cited as one of the most severe to ever hit the 50-mile route. Shipping company Maersk have reportedly re-routed containers to the Panama Canal Railway to avoid the canal.
On 1st January 2024, the coast on Honshu, Japan, was struck by a 7.5 magnitude earthquake with shockwaves felt as far away as Tokyo, causing the first major Tsunami warning to be issued since 2011. Several electronic component manufacturers issued statements whilst they assessed any damage caused to buildings and what impact if any there would be on supply.
Lunar New Year is celebrated on 10th February, welcoming the year of the Dragon, under the Yang Wood element. The Dragon is the fifth animal in the zodiac, considered to be the luckiest. He symbolises power, wealth, and success, subsequently forecasting opportunities and changes.
Capacity and lead-time issues
- Murata have confirmed damage to infrastructure and equipment at their Anamizu plant which manufacturers chip inductors and common choke coils. Production is not expected to restart until mid-May 2024 or later.
- Wakura Murata Manufacturing Co. Ltd expect production of their multilayer resin substrates to be resumed from early March 2024.
- Toshiba Electronic Devices & Storage are expected to be fully operational by mid-February 2024.
- ASML and Samsung plan to build a research centre to develop EUV (Extreme Ultraviolet Lithography) technology in an investment worth $760m.
- Intel terminated its acquisition of Tower Semiconductor under mutual agreement – reportedly costing Intel a fee of $353M. Intel plan to provide foundry services to Tower along with 300mm manufacturing facilities.
- Qualcomm has decided against a renewed bid for NXP Semiconductors NV.
- Lunar New Year falls on Saturday 10th February 2024 and will celebrate the upcoming year of the Dragon. Factories celebrating this event will shut down for one week either side, allowing workers to travel home to spend the holiday with family.
- Due to Lunar New Year, an increase in air freight out of China is always seen and with this is a temporary increase in air freight, usually applied with a short-term surcharge.
- Starteam Global have acquired Photronix Ltd, strengthening their offering to customers in the PCB market.
- Oil pricing is back to $80 per barrel, dramatically falling from the September 2023 highs of $90 per barrel.
- Gold has climbed somewhat, selling at £1,600.41 per ounce at time of writing.
- Silver has fallen to £17.66 per ounce, an 8% decrease over 12 months.
- Steel rebar has risen steadily and slowly, now showing 3-month contract pricing of $604.50 per tonne.
- Bitcoin peaked at the start of the month in highs not seen since the start of 2022, valued today at $38,899.80 each.
- Copper pricing has also fallen over 12 months, with cash bids today at $8,254.50 per tonne.