It all starts with oil, and therein lies the problem.
The rubber industry's dependency on petrochemical feedstocks caused virtually unprecedented price increases by suppliers in 2004. You'd need a scorecard-a long scorecard-to keep up with them.
Throughout the year rubber product makers heard the same message from suppliers, again and again: ``Our costs are soaring, our margins are eroding. We have to raise prices.''
Suppliers weren't making it up.
Oil prices hit a record $55 per barrel in October, fueled by a number of factors. Worldwide demand was a big one-the fastest pace in 16 years, according to various economic reports. China led the way by importing 20 percent more oil than a year earlier, and the U.S., Japanese and European economies all sucked down black gold at a rapid rate.
That occurred while inventories were low, OPEC countries kept their stockpiles down and U.S. refineries ran flat out. The weakening U.S. dollar helped fuel the crisis, as did disruption and/or fears of disruption of oil supplies in global hot spots like the Middle East, Nigeria and Venezuela.
All this translated into higher costs for anything chemical-related. Prices for all chemical products in the U.S. increased about 11 percent through October from a year earlier, according to preliminary figures from the Department of Labor's Bureau of Labor Statistics.
It was worse for individual chemicals and products made from them. Take methylene diphenyl diisocyanate, for example, a curative widely used in polyurethane processing. The cost of benzene tripled in the first seven months of the year, subsequently followed by MDI price increases.
Styrene-butadiene rubber, the most common of synthetic rubbers, was the subject of several price hikes as the cost to make it soared and the number of supply sources decreased. Two independent companies make SBR in the U.S., but the Asian firms that previously filled in the market now are shipping their products to China.
Add to that the fact Goodyear is pulling out of the SR mercantile business, and many U.S. rubber processors found themselves high and dry, paying a premium for SBR-if they could get it.
American rubber processors did their best to protect their margins by trying to boost prices of their own products. The tire industry led the way with several announced increases, some even for original equipment tires. The result: Government figures show wholesale tire prices climbed 4.8 percent through October, as did belting. Hose makers got a little less, a 3.5-percent rise.
Others didn't do so well. The government statistics show molded mechanical goods prices, for example, rose just 1 percent.
As one 25-year industry veteran put it, ``this is probably the most difficult year I've seen, both from the standpoint of the amount we have to increase our prices and the amount our suppliers are increasing prices to us. When you're getting a 25-, 35- or 45-percent runup, how do you deal with that?''