International Latex Conference: Pandemic shows need for long-term changes

CUYAHOGA FALLS, Ohio—If you're in the latex industry, Tom Marsh is betting you've been asking yourself the same question since the first quarter of 2020.

"How the hell did we get here?" he said. "How did what I'm calling the ripple of news—the rumors, the concerns, the things we heard out of China in late 2019, sort of the calm before the storm if you will—how did that build and turn into this tsunami of delays and price hikes and shortages that we face daily now?"

To borrow a phrase from Ernest Hemingway: "gradually, then suddenly."

Marsh, the managing director of global latex operations at Pioneer Worldwide, spoke about the pandemic's wide-ranging effects in his presentation, "Supply Chain Disruption: Ripple … Tidal Wave … Tsunami …" during the final day of the virtual International Latex Conference, presented by Rubber & Plastics News.

Marsh has more than 40 years of experience in the rubber and latex industry, working for companies such as Abbott Laboratories, Ansell Healthcare, The Ore & Chemical Company, Centrotrade Rubber USA Inc. and Halcyon Agri/Corrie MacColl. Consequently, he's seen all sides of the industry.

Here are four takeaways from his 60-minute presentation:

1. There were pre-pandemic problems

Pandemics aren't new—Marsh pointed to the 1918 Spanish Flu, the 1957 Asian Flu, the 1968 Hong Kong Flu, SARS in 2002 and Swine Flu in 2009—and the World Health Organization warned as recently as 2018 that a critical flu pandemic would result in massive death rates and have a severe effect on the world economy.

In 2019, the Global Health Security Index assessed 195 countries and concluded, "No country is fully prepared for epidemics or pandemics, and every country has important gaps to address." One of the GHS' recommendations was to stockpile medical gloves and medical devices.

"Suffice it to say," Marsh said, "the warnings were not heeded."

As recently as 1985, the U.S. and Europe were mostly self-reliant when it came to glove production, but the mid-1990s saw a mass exodus to southeast Asia, where most gloves are now produced. The U.S. went from strategic stockpiling to a "just-in-time" mentality, even though supply chains were getting longer. Meanwhile, the number of vessels were decreasing and the vessel sizes got bigger, slowing down the loading and unloading process.

"National latex volumes, especially here in North America, declined dramatically," he said. "Natural latex prices tumbled … to 30-, 40-year lows.

"That should have been a sign that this is not sustainable."

Consequently, when COVID-19 hit, the global supply chain wasn't prepared.

"The signs were there," Marsh said. "Just like a storm rolling in, I think we all were worried about it, but we thought the government or someone had it under control."

2. The supply chain disruptions created a whiplash

Demand for most goods—gloves and medical devices being an obvious exception—plummeted early in the pandemic, then quickly ramped back up. Latex demand outpaced production. Shipping rates quadrupled and natural rubber latex prices nearly doubled. Containers were scarce and vessels were delayed at docks across the world.

Latex, in particular, faced shipping problems since it requires specialized containers.

"This creates a whiplash that magnifies the wave," he said. "We have everyone wanting vessels, containers, space, trucks, rails, you name it. We're all competing for the same assets."

Once the world's economies ramped up, the problem only got worse.

"Just like the waves, the ebb and flow of the tides, it amplifies each time the cycle repeats," Marsh said. "It really exposed the weak links in our supply chain."

3. The worst may not be behind us

In addition to supply chain problems, many companies are facing what Marsh called "the most depleted job market I've ever faced." Pioneer Worldwide, for instance, is seeing huge demand for its toy balloons, but between the company's four plants, there are close to 100 openings.

"This is happening across all industries," he said. "This isn't specific to rubber and latex."

Many parts of the world are seeing another wave of COVID-19 cases due to the delta variant and low vaccination rates. And many companies are starting to raise prices, both because of increased material and labor costs and because they've tried to operate with lower margins to survive the pandemic. Those costs will eventually be passed on, he said.

"Some feel that this tidal wave has crested," he said. "Here I would say, 'Cue the scary music.'

"There are some declarations that the crisis has peaked. My personal feeling is that it hasn't."

4. We need long-term changes

Global demand for gloves is expected to grow from 200 billion in 2019 to around 500 billion in 2027, Marsh said, which means it's crucial for the U.S. to make long-term adjustments.

He recommended moving from a "just-in-time" system to a "ready when needed" system, while also moving to produce more gloves domestically. Some of that is already in the works—the U.S. Department of Defense is coordinating efforts with the Department of Health and Human Services to provide more than $220 million in funding for three rubber-related projects—and the industry is working to develop alternative polymers.

U.S. companies can compete, Marsh said, but only if they're judged on reliability and availability and not just price.

"This is a wake-up call," he said. "We had all these warning signs and this is the big hit. Why should we drop our guard and think this could not happen again?

"I hope we're all smart enough to heed that warning and not let our guard down."