Thailand floods disrupt global production

The floods in Thailand continue to break production chains. The largest natural disaster in years casts doubts on the reliability of labor division in global scale. Thailand counts human and infrastructure losses in the first place. The decrease of the tourist flow in the country will result in a serious reduction of income.

The floods in Thailand may last till December 2011. The number of tourists entering the country will decrease by nearly 6.5 million people, Tourinfo said with reference to the tourist administration of Thailand. The tourist industry of the country has already suffered the losses of over $800 million.

The transnational corporations that have productions in Thailand also face serious losses. Toyota, for instance, cuts production volumes on all of its enterprises in North America. The floods in Thailand disrupt spare parts deliveries, Japan's NHK said.

Officials representing Ford Motor Co. and Michelin also announced interruptions of assembly works in Thailand. Ford has already produced 17,000 less cars than was originally planned. As many as 30,000 more cars will not be possible to produce because of the floods that damaged the company factories in Thailand.

Toshiba's factory was flooded in Pathum Thani Province of the country. The Japanese corporation has to shut down nine of its enterprises in Thailand. Toshiba announced the launch of the production of hard drives in the Philippines.

China's Lenovo Group Ltd. also announced problems with the production of hard drives. The Chinese company said that the natural disaster would disrupt the shipments of hard drives in the first quarter of 2012.

According to HIS iSuppli, the deliveries of hard drives may drop by 30 percent in the fourth quarter of the current year. The Thai floods reminded everyone that the world computer industry depends (on the level of 40 percent) on the hard drives produced in Thailand, BFM reports.

The factory of Western Digital Corp. has been flooded as well. Seagate Technology PLC has already warned about a possibility to suffer from the shortage of component parts.

Mazda Motor Corp. said that it was considering an opportunity to purchase spare parts from Chinese and Japanese factories to continue the operation of its productions in Thailand. It will be possible to reach the previous volumes of production in two or three months after the floods.

The disaster in Thailand activated the food market. The country is a large rice supplier. The floods may send the prices on rice up to $750 (from $630) per ton. The Indian rice may grow in price from $480 to $500.

"The quotations on wheat and maize may grow as well because Asian countries may begin to import them in large volumes," Anton Safonov, an expert with Investcafe said.

Vladimir Shabanov.

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Author`s name Dmitry Sudakov