Benchmarking

from InsideRubber Issue 1 2022

Industry

Feast or Famine in ’22 for Rubber Products Manufacturers?

By Tony Robinson, Analytics Director, ARPM

Leaders in the rubber products industry have their individual forecasts for 2022, but what does the nearterm future hold for the industry as a whole? At this time last year, rubber process executives were viewing 2021 with great optimism. The pandemic supposedly was winding down, production was reaching pre-pandemic levels and there was tremendous momentum moving into January.

Unfortunately, the year did not live up to expectations, with new COVID-19 variants disrupting plans and a barrage of supply chain issues hammering processors throughout the year. With this said, processors are bringing optimism into yet another new year and hoping that 2022 will be the proverbial light at the end of the tunnel. But will this year truly be any different than last? To answer this question, the Association for Rubber Products Manufacturers (ARPM) conducted its annual industry analysis and has published its 2022 State of the Rubber Industry Report, which shares trend data on many key indicators. “...ONLY 46% OF SURVEY RESPONDENTS INDICATED THEIR RAW MATERIAL PRICES HAD INCREASED FROM THIRD TO FOURTH QUARTER 2020. HOWEVER, THAT NUMBER HAS SKYROCKETED TO 96% IN THE FINAL QUARTER OF 2021.”

Examining several elements of the business development cycle, it appears that most rubber processors are performing very well. When comparing third to fourth quarter of 2021, performance in quoting, sales, backlog and shipments have improved or remained consistent for about 85% of processors. These indicators have outperformed themselves consistently throughout 2021, based on data from ARPM’s Quarterly Pulse Reports, showing strong growth in the industry and demonstrating great potential for success in 2022. In last year’s State of the Rubber Industry Report, only 46% of survey respondents indicated their raw material prices had increased from third to fourth quarter 2020. However, that number has skyrocketed to 96% in the final quarter of 2021. In addition, 90% of respondents also indicated increasing raw material lead times make it much harder to plan production and meet customer delivery requirements.

Top line sales forecasts also are showing promise for many processors, as 73% of processors reported increased sales in 2021 compared to 2020. The sales increases in 2021 primarily are due to new programs or increased volume in current programs from existing customers. Processor forecasts solidify optimism moving forward as 77% of respondents anticipate increased sales in 2022.

Chart 1. Raw Material Lead Times – 3rd Quarter to 4th Quarter 2021

Although several top-line indicators appear to have strong momentum, rubber processors still are faced with major supply chain challenges and increasing raw material prices that continue to plague bottom lines throughout the industry. Processors can pass along some of these increases and adjustments to customers, but these challenges will indubitably hinder performance for rubber processors across the country. One business leader reported, “Some of our raw material suppliers are rationing quantities to sell and distribute with longer lead times and, combine that with long

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shipping delays, our business definitely is being affected.” Most processors (84%) do not expect the supply chain to return to normalcy until at least third quarter 2022, showing more pessimism compared to the outlook one year ago. at <50% due to lack of staffing has required outsourcing more production. Outsourcing takes a lot of time away that could be spent on internal improvements. Additionally, we had to drop several product areas, including automotive, due to lack of staff.” Even when a processor can get its hands on raw material, it sometimes does not have the employees to manufacture the parts, causing serious strain on fulfilling customer orders on time.

Chart 2. Raw Material Prices – 3rd Quarter to 4th Quarter 2021 Rubber processors also are facing continued labor shortages, which was a pre-pandemic issue. The situation has remained difficult, with processors continuing to have many open positions, high turnover, training difficulties and rising pressures to increase entry-level wages. As one executive indicated, “We lost some significant talent and have had great difficulty hiring new people. Production performing

Overall, the data from ARPM’s 2022 State of the Rubber Industry Report reveals similar top-line momentum compared to the beginning of 2021, but severe supply chain issues and labor shortages could stifle bottom-line profits. If processors can gain access to labor and materials, 2022 could be extremely profitable. Will this year be the light at the end of the tunnel the industry is hoping for? Only time will tell. u For more information or for ARPM’s full 2022 State of the Rubber Industry Report, visit www.arpminc.com.