The boss of Siemens, Europe’s largest industrial manufacturer, has likened global supply chains to a “rollercoaster” as prices of materials such as metals and resins whipsaw because of an uneven economic rebound.
“At least for the next two quarters, we will see this [price] pressure,” chief executive Roland Busch told the Financial Times. “The markets are so volatile.”
The physicist, who took over at the helm of the German group in February, said that the speed of the global recovery was having a “delayed effect” on Siemens’ suppliers, which were still struggling to meet demand.
The sudden boom in orders last autumn, in the wake of a sharp, pandemic-induced drop, resembled “a very sharp V . . . in China it was a very, very sharp V,” Busch said.
“If that happens in large markets, you are running a rollercoaster in your supply chain . . . you have this hysteresis effect, and that is exactly what we’re seeing.”
Busch’s comments came as the latest purchasing managers’ index, published by IHS Markit on Wednesday, showed that the disruption to global supply chains — in particular shortages of steel, copper, wood and plastics — had driven up input prices for eurozone businesses at the fastest rate for more than a decade.
The PMI data, including the biggest rise in average prices charged for goods and services since 2002, indicate that pressures are likely to continue after inflation in May rose above the European Central Bank’s target of just under 2 per cent for the first time since 2018.
However, central bankers such as ECB president Christine Lagarde have predicted that the rebound in inflation will be “transitory” and said supply constraints would fade by next year.
In June’s PMI report there were the first signs that the constraints could be easing in Germany after “a slight fall in the number of businesses reporting longer lead times on materials and components”.
Siemens’ Busch said that for now, the group was able to pass on the price rises in materials to its customers, without losing business.
“Our competitors are sitting in the same boat, buying from the same suppliers,” he said. “As long as we have innovative products, we have a certain pricing power as well.”
Siemens, which has undergone a deep restructuring and spun off its health and energy businesses, is preparing to unveil the next step in its transformation from a conglomerate to a more focused group of companies, complemented by software expertise.
“Our customers benefit from our ability to combine the real and digital worlds,” said Busch.
The group’s core businesses, which focus on automating and digitising factories, running buildings and electricity grids, and building trains and infrastructure, would pursue acquisitions in “highly attractive adjacent markets”, he added.
Busch cited the recent purchase of Californian company Supplyframe, an online marketplace for electronic components, for $700m as an example of the kind of acquisitions Siemens would look to make in the future.
Siemens said that it expected its revenues from software, which stood at €5.3bn in 2020, to grow at a compound annual rate of about 10 per cent over the next four years.