Brazilian industrial sector short on inputs and raw materials due to pandemic

A special survey conducted by the CNI (the national confederation of industry), pointed out that the Brazilian industrial sector is now experiencing the second effects of the Covid-19 pandemic. The first stopped production. In the second, stocks, inputs, and raw materials are lacking. According to the survey, 68% of the companies consulted are having difficulties in obtaining inputs or raw materials in the domestic market and 56% of the companies that use imported inputs regularly are having difficulties in acquiring them in the international market.

In addition, 82% of companies noticed an increase in prices, with 31% reporting a sharp increase. The survey counted on the participation of 1,855 companies between October 1st and 14th, in 27 sectors of the transformation and extractive industries. Robson Braga de Andrade, CNI President, explains that companies chose to reduce inventories to face the sharp drop in revenue and the difficult access to working capital in the first months of the crisis.

“The economy reacted faster than expected. Thus, there was a mismatch between supply and demand for inputs. And both producers and suppliers had low inventories. At the height of the crisis, we saw the demobilization of production chains and low stocks. In addition, we have a strong devaluation of the real, which has contributed to the increase in the price of imported inputs”, he says.

The survey shows that 44% of the companies surveyed say they are having trouble serving customers. These companies point out among the main reasons for the difficulty of service: the lack of inventories pointed out by 47% of the companies; demand that is greater than production capacity, reported by 41% of companies; and the inability to increase production, according to 38% of the companies.

Of the total of companies that are unable to increase production, 76% claim that they are unable to increase production due to the lack of inputs. And the problem should last at least another three months. 55% of the companies believe that their ability to supply customers will return to normal only in 2021. The perception of the input market is less optimistic. Among respondents, 73% believe that it should only improve in 2021.

In 10 of the 27 sectors considered, at least half of the companies are struggling to meet demand. The percentage of companies that find it difficult to supply customers is higher in the Furniture (70%), Textiles (65%), and Plastic products (62%) sectors.

Small businesses are most affected by the lack of inputs

The situation is more serious among small businesses. In this segment, 70% were affected by the lack of inputs compared to 66% in the large ones. In addition, the percentage is higher for smaller companies that claim to face a lot of difficulties, reaching 28% among small companies and 27% among medium-sized companies.

In the case of obtaining imported products, the distance is even greater. While 77% of the small ones reported difficulty in obtaining these raw materials, only 50% of the large ones are in the same situation.

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