Online exclusive: Hose firms face issues, enjoy growing market

The hose industry, like many of the other rubber-related sectors, is not immune to the various volatile issues that have been prevalent thus far in 2021.

That includes material shortages and price hikes, along with a number of logistical challenges that have caused not only delays but increases in cost. And everyone from the supply side of the hose industry value chain to the distributor customer base is feeling the pressure.

While business levels have been strong and industry participants are slowly starting to get out and travel to meet with vendors and customers in some cases, they also simultaneously are having to deal with this myriad of issues.

"They are struggling to know when deliveries are happening, and what kind of products are coming in," said Molly Alton Mullins, executive vice president of NAHAD: The Association for Hose and Accessories Distribution. "Large manufacturers are into their fourth increase of the year, and don't see an end in sight."

Michael Aubuchon, president and CEO of North American Fire Hose Corp. in Santa Maria, Calif., said the first quarter of 2021 has seen business grow, but now his firm is having to deal with this whole new set of challenges. His firm has found it difficult to obtain raw materials, and many producers are scaling back on output of everything from reinforcing yarn used in hose production to synthetic rubber, various compounding ingredients, thermoplastic polyurethane, coating materials, and even the brass and aluminum couplings.

He sees three reasons for many of these difficult business conditions. First, producers curtailed manufacturing of a lot of these materials in anticipation of reduced global demand during the early shutdowns caused by the global coronavirus pandemic. Then the freeze in the Gulf States shut down refineries, adversely impacting many materials, raw materials, intermediates, monomers and polymers that NAFH uses in its production.

The last factor he said has complicated matters even more is the global and domestic logistical issues. First it was the inability to find shipping containers for raw materials produced overseas, mostly in Asia. Then it became difficult to book space on freighters, followed by the ports becoming overloaded and unable to offload shipments in a timely manner. And the final piece of the puzzle is finding truckers to truck materials either from harbors or across the country.

All of these happened in stages, making it very difficult to obtain certain materials, according to Aubuchon. TPU has been tough to come by, and a number of raw materials producers have declared force majeure.

"One of our compounders called and said your next shipment of rubber stock is going to be late," he said. "They couldn't get a particular process oil they need to mix up our compounds."

The price increases have been hefty in most cases, the NAFH CEO said, in the range of 10-20 percent for some materials, including rubber, yarn and others. There was one quote for butane diol, used in the manufacturing of urethanes, where one price came in at double the normal price because the supplier was having to buy it on the spot market at a time when there was virtually no supply available.

Freight costs also have exploded, with Aubuchon saying a 50-75 percent premium to ship goods across the U.S. now is commonplace—if you can secure shipping at all.

"We got a call from a shipper, who said you have a shipment scheduled for Monday," he said. "They asked us to give them an extra $1,000. When we told them no, they said, 'Well, we won't be there on Monday then.' It's been that ridiculous in some cases."

Aubuchon said NAFH has been able to pass on some of the increases they've received this year, but he doubts it will be enough as costs continue to skyrocket. "We're hoping that the increase we did get through will be adequate to cover the costs through the end of the year, but we're not sure that's the case," he said.

Rob Lyons, president of distributor Tipco Technologies Inc., said it's been challenging dealing with all the price increases.

"They're not just coming at us fast, but they're coming at us in multiple notices," he said. "We get an increase, then another six weeks later. That's frankly quite difficult for a distributor like us to manage—passing those increases on, then having to do it a second or third time.

"The customers get it because they're seeing these types of increases across their supply chain, but we have to pay very close attention to it if we want to protect the margins that we've earned."

Lyons said the biggest increases are coming in plastics such as polyvinyl chloride and urethanes, with cost hikes ranging from 15-25 percent. For metal fittings, Tipco is seeing more like 5-10 percent, and 5-7 percent for rubber goods.

Vendors have given a wide range of reasons. "The costs associated with shipping globally has been a huge driver, but also raw materials, or lack thereof," he said, noting the ongoing shortages in some raw materials.

Aubuchon said North American Fire Hose has dealt with the shortages in a manner that many may not consider a cost-efficient option: The manufacturer carries a lot of inventory.

"If I were part of a bigger company, I'm sure I would be getting static about all the raw materials that we maintain, but you can't make fire hose if you're missing even one of those materials," he said. "Because of our business model, just-in-time inventory is not in our vocabulary. You better have it in inventory, especially right now when you don't know when you can secure some materials."

Thus far, NAFH has been able to meet obligations to its customers, and if it ever gets to the point where that may be an issue, Aubuchon is confident the company's good relationships with its major raw material suppliers will be an asset.

"We've seen limited force majeure on some items, but because of our inventory, we're able to get over those hurdles," he said.

Another buffer is that North American Fire Hose also keeps a stock of work-in-process inventory. "We extrude our rubber liners well in advance," Aubuchon said. "We can't store the rubber forever or we'll have pre-cure issues, and things like that in production.

"Shelf-life products are the most difficult, but we've managed to get through that, and if we have to reformulate or re-evaluate, we can do that as well."