Eutsler Technical Products Inc. is one of those rubber component suppliers that is enjoying an uptick in business with growing activity in the oil and gas market, but also dealing with market conditions that can make things difficult, said Mike Borski, president of the Houston-based firm.
While labor market woes have eased somewhat, the current problem involves materials, both in terms of shortages and volatile pricing. Eutsler has invested a significant amount of time and effort on a few new projects that have good potential for the firm. The company's technical director worked to get new compounds qualified for the projects, only to be told they might not be able to get the materials.
Some of the fluoroelastomers are going to microchips or to the automotive industry, Borski said, while nitriles and NBR are being diverted to making battery casings for electric vehicles. For some of the materials Eutsler uses, suppliers are enacting allocations based on historical usage.
"It's tough to get new business when you're on allocation," he said. "Now I'm concerned. We've invested money on new equipment, and are we even able to get polymers to make compounds with to run the equipment? You forge ahead and cross your fingers and kind of hope things will level out and straighten out. But I don't know, it's hard to really gauge what's going to happen."
Pricing is fluid as well, to put it mildly. Borski said Eutsler had placed some purchase orders for an FKM last November and December, and the materials are just now coming in. To make things more difficult, the supplier told them the price at the time of the order—but that Eutsler would have to pay whatever the cost is when the product is delivered.
"It makes it difficult to run a business, because how do you price something to your customer when you don't know what kind of increase you might get?" he asked.
Eutsler has been able to manage so far, but some customers are concerned about the price increases. Borski said he has to tell them that the firm has no choice but to pass the cost hikes on to them.
"Price increases have been across the board with everything," he said. "We're seeing anywhere from 30-40 percent price increases, and things are still going up.
"In years past, when we'd get a 2- to 3-percent price increase, we could eat that. But when you start getting up into the double-digit price increases, I don't think there is anyone who can swallow that without passing it through to the customers."
Others are dealing with similar circumstances. Gonzales said Moss Seal is seeing major delays in getting raw materials. Being a distributor for more than one vendor sometimes can allow Moss to offer an equivalent option from another manufacturer.
In other instances, the firm has had to machine a metal part out of a larger, more-expensive size bar because the standard size bar hasn't been available.
"We have to go up in size. The customer doesn't care. They just need that part and they will pay more because we had to cut it out of a bigger bar," Gonzales said.