Collecting Vs. Hoarding

We’re witnessing two seemingly contradictory events within the industrial world: global decline in demand as industry comes to a halt, and a surge in the prices of raw materials. In a perfect storm, the world is experiencing supply chain bottlenecks, a price war in crude oil, panic-buying, a billion people in lockdown, a spike in the US dollar, and millions unemployed with millions more to follow.



In response to disruptions in supply, sea freight carriers have cancelled an excess of 100 sailings, equaling 45% of the capacity between Europe and Asia and the transpacific region. By the time Chinese factories reopen and volumes surge once again, the propagation of COVID-19 around the world will have drastically impacted demand.



Even as demand increases, it will take time for ocean carriers to re-adapt and re-adjust capacity. In the wake of this type of supply uncertainty, buyers respond by hoarding. And this behavior leads to immense price volatility in the market far beyond a return to “normal.” Certain products - like face masks, toilet paper, and some feed additives - will be hoarded, while other products will be sold at a loss.



The bad news: we can continue to expect disruption for weeks if not many months to come. The good news: by understanding this in advance we can carefully steer purchases between erratic customer demand, the collapse of demand, destocking, and price drops.



Stay safe, stay healthy - you are far more resilient than you think.