Supply Chain Challenges Persist

By Matthew Bodoff

In early March, ISFA released an industry news update around supply chain issues from winter storm Uri and how it has affected the North American petrochemical supply chain, and in turn, affecting the surfacing industry. The hope was these changes would be a contained, short-lived blip in the supply chain.

In mid-March, Tecnon OrbiChem, a chemical industry research firm, published an update to show how the effects of winter storm Uri will continue to affect supply chains for months to come.

Global benzene and styrene markets continue to be affected by the shutdowns in the Gulf Coast region, and many factories have been slow to get back online. US Styrene values have increased by more than $500 per ton since the end of February. Ethlyene production saw offline rates hit at least 70 percent through February, and as much as 50 percent production capacity was still offline as of early March. Prices have risen over $300 per ton.

Glycol and other derivatives were already in short supply following the 2020 hurricane season, and this year’s winter storms have made things worse. By mid-March, almost 50 percent of the nation’s ethylene capacity was still offline.

But even before the storm, raw material prices have been steadily increasing since the fall of 2020 due to labor shortages and the COVID-19 crunch. Many suppliers haven’t returned to pre-COVID production rates.

And this isn’t just a U.S. problem. In late March, CompositesUK, a major resin industry trade association, released an updated statement highlighting the European challenges to chemical supply. They highlight that 32 chemical suppliers are on Force Majeure affecting availability in the marketplace. A normal supply of imported raw materials from China and East Asia hasn’t been available to European and North American customers because of a strong demand in China.

Exacerbating the problem is a global logistics strain with a lack of shipping containers, which are increasing freight costs and creating sea freight delays. Container freight rates have increased up to 90 percent for some shipping lanes.

Oh, and perhaps you heard about that little traffic jam in the Suez Canal in late March. Yes, that one very big ship, Ever Given, held up nearly $60 billion in global trade in just six days. By the time Ever Given was freed from its awkward position, there were more than 350 container ships queued up waiting to pass. Receiving ports and terminals will now have to work overtime to deal with the surge.

Be prepared for tight inventories, short supply and the eventual rise in prices as these supply problems ripple through the chain. Spring is the busy season for the composites, coatings and related industries, so demand has continued to be extremely strong despite shortened supplies.

So many challenges, so little time.