Supply chain woes march on

PITTSBURGH—Most people in the rubber industry had expected the supply chain challenges that have been in full force since early this year to ease up by the end of 2021. But now, that clearly won't be the case.

In fact, it was the one topic on everyone's mind—besides the COVID-19 pandemic, of course—during the ACS Rubber Division's International Elastomer Conference, held Oct. 4-7 in Pittsburgh. Virtually every company, no matter what it is supplying and where it falls on the supply chain, is impacted in one way or another by inflation and "horrific" logistical challenges.

The worst part? There does not appear to be an end in sight. Straight from the expo floor, here are a dozen supply chain challenges facing the rubber industry.

Sumitomo Chemical Advanced Technologies is a producer of resorcinol, and they seemed to be in better shape than many when it comes to meeting customer needs. It has plants in Japan, but the firm got on top of the situation early this year, according to Tony Da Cunha, sales manager for energy and functional chemicals.

"Traditionally we would bring our product in through certain ports on the West Coast. We started looking at alternative ports on East Coast," he said, adding that it also considered getting material from sister plants in Europe. "For the most part, we have been able to meet obligations."

The firm has had some issues getting materials for its laboratory, said Mike Walkup, director of resorcinol resins and polymer technology.

"We've had a lot of reshuffling of priorities," he said. "We make sure we get something done, it's just not in the order we're hoping."

Getting containers to bring materials from overseas still is a struggle for suppliers, said David Luevano, who works in purchasing at PTE Compounding de Mexico S.A. "This is causing a lot of delays," he said.

Another problem is EPDM suppliers that are shutting down lines, as that is one of the main synthetic rubbers PTE works with. The firm, to date, has been able to meet customer demand. "We're making a lot of developments so they can substitute these materials," he said. "You have to look at other options to meet customer requirements."

ChemSpec has experienced "horrific challenges" in the supply chain, as President and CEO David Moreland put it. "And I don't see it getting any better in the near future," he added, suspecting the industry won't see improvements until the third quarter of 2022.

ChemSpec, a Uniontown, Ohio-based member of Safic-Alcan, is a North American distributor of specialty and commodity chemical additives and specialty polymers in the elastomer industry.

"I'm worried about the economy, because pretty soon it will catch up," he said. "There'll be even more problems with (the) supply chain not having product, (as) a lot of plants aren't running even near capacity, so it's just going to be difficult."

Moreland said ChemSpec's challenges stem from cost increases due to freight.

"Is that sustainable for the customer to continue to say OK for the higher price?" he asked. "Everybody's cost of their final product is going to continue to increase. They have to pass along those costs to the end consumer, and therefore you're going to have other issues: inflation, et cetera, et cetera."

Chris Wagner, marketing and law director at ChemSpec, drew attention to energy restrictions in Asia and container shortages for their products.

"The thing we're having a real battle with is anything that has some sort of hazardous classification," he said, noting shortages in proper containers for hazardous products. "There's situations where suppliers basically say, 'hey, call me next year,' because they can't find a container to ship this stuff over."

Seika Machinery Inc., the North American distributor and sales agent for Ueshima Seisakusho Co. Ltd., has experienced lengthened lead times as a result of the supply chain woes, said Tim Cappoen, sales manager for Seika.

"We have to import all of our products from Japan," he said. Ueshima designs and manufactures physical test equipment and instruments for the rubber and plastics industries. Coppoen said shipments and boarding have been "problematic" for the company, but at this point, end users know the drill.

"By this time, I think end users already know that and they anticipate it, but at the beginning that was sort of an unexpected development," he said, noting that the issue has been more of a "pain in the neck" as opposed to a major issue for the company at this point.

"There's no way around it, really," he said. "There is no solution."

It's just a matter of waiting for the things to get back to normal post-COVID-19, and finding the labor to help streamline the process.

Barwell Global USA supplies rubber processing machinery produced by its parent company's facility in China. Shipping costs have become a slight issue, and delivery times have been extended, but one of the big problems is getting a spot on ships for machinery of the size that the firm supplies, said Ian Turner, vice president of sales and services.

Barwell has a couple companies it deals with that have helped it keep delivery close to promised times. And that has helped because business has been strong this year, particularly from May forward.

"We're trying to automate more because a lot more customers are looking for systems that can be operated with fewer personnel," Turner said.

The shortage of computer chips is causing major issues for machinery maker French Oil Machinery Co., said Jason McDaniel, the firm's president and chief operating officer. It's made it difficult to get PLC components for the presses it supplies to rubber product makers, and impacts other electronics as well.

Some delivery times have been a few weeks, while others have been months. "We have no control over it, so it's a lot of communications with the vendors," he said. "(Customers) know what's going on, and there's an understanding, but no one's happy. That's the issue. They have production to run and they need the machines, and we can't supply those machines. And others can't either."

When COVID-19 hit, many thought industry would go down, so they stopped producing materials, said Doug Moon, applications manager for ITW Pro Brands, a producer of water-based mold release agents.

"When that didn't happen, everybody came up short, and demand is above supply, so everybody wanted to raise their prices," he said.

For the most part, though, ITW has been able to meet supply. "There have been some delays," Moon said. "We haven't shorted too many, but we've had to jump through a lot of hoops to maintain on-time supply.

"Everyone was hoping it would ease up by now. But it's an ongoing issue, and we're fighting hard to maintain our customers to get them what they need."

Brian Altman of Altman Manufacturing Co. Inc. is a third-generation owner at the firm. At 8,500 square feet and between 12 and 20 employees, it is a smaller, privately-owned firm.

To his company, the supply line challenges are real.

"Yes, we are absolutely experiencing this," Altman said. "The one big one is steel … everything we do works with it. We are now pushed out to two to three weeks. To get around that you have to get creative."

Typically a guy like Altman is the last to get in line before others start making parts once again.

"A lot of our machinery includes electronics, and the chip shortages are causing issues with getting certain parts. Instead of waiting for ships overseas, we are shipping air freight. As soon as we are purchasing them, they are flying it in."

Desma USA Inc., a supplier of injection molding presses, also has had problems sourcing microchips, but it has worked on getting multiple sources for the tough-to-get parts.

To remain viable, many companies needed to think outside the box, and Desma was no different, pre-ordering scarce electronic chips used in its machines.

"We are certainly in a unique situation right now," said Desma USA President Scott Early. "There is activity in the market, which is good, and we keep several machines in stock. But it has been difficult to get the chips."

Desma will look to be creative with its supply line by maintaining a multiple-supplier philosophy for microchips—the only way, Desma said, to keep the crucial, tiny part available.

Like so many others at the IEC, Elite Advanced Polymers is seeing the same market tightness as everyone else who bases their success on raw material pricing and efficient supply chain management.

And though both are volatile right now, officials with Elite and its private equity owner DestinHaus Capital L.L.C. said the custom mixer remains in a good position.

"Obviously with DestinHaus we bring those relationships where we source raw materials and receive logistical help," said Andy Claytor, vice president of sales. "And I have 30 years of experience in the rubber industry, so I have relationships with people as well from this end.

"We are always looking to see if there is a better way of doing things, and we want to continue those important relationships with our suppliers."

And the next step, Claytor said, is determining how to translate experience and relationships into the procurement of materials for customers during these unprecedented times.

For chemical wholesaler Lintech International, the issue is not just sending and receiving shipments, but also getting products across the country.

"We have 12 warehouses across the U.S., so we pretty much utilize every port in the U.S.," said Jay Downs, director of marketing and business development at Lintech. He said the Macon, Ga.-based company has had product containers sitting in the water at one of the ports for about two months.

"What we're really concerned about is not just getting the containers off of the ships into the port. It's going to be a lot of intermodal challenges of getting the products across the country," Downs said.

"Some of the things we've been doing to compensate for that is spread out our shipments depending on the port," he said. "We've really been dispersing where we bring out containers in from overseas."

Another solution is air freight, Downs said. In cases of critical partnerships or customers, Lintech has utilized air freight on their specialty additives.

Brian Chapman, general manager of Kuraray America Inc. is blunt in his assessment of the current state of the synthetic rubber supply chain problems: "All raw materials and logistics are just totally screwed up," he said.

It takes two- to three-times longer to bring in materials from the Pacific region, and pricing of materials is triple what it was in some cases.

"It's been a struggle," he said. "The issue was already present before the freeze in the Gulf Coast, but after the freeze (it) just got worse."

Business has remained strong, which is good, except that Kuraray can't recover all its costs.

"Competition is strong, so it's hard to raise prices," Chapman said. "Plus our customers' competition is strong, so downstream prices are low."

The time to get materials to the U.S. can be months, because there are issues at every point in the shipping process. "I don't know when it's going to fix itself. I think it's going to take awhile," he said.

Andrew Schunk and Sam Cottrill, Rubber News staff, contributed to this report.