Polymer, ingredient, component and energy challenges in the entire elastomer industry
June 2022
It is hardly news anymore: constraints due to disruption in supply chains, reduced capacity, force majeures and shortage of energy resources. The industry is in a perfect storm, and we do not know when and at what level it will end.
At the same time, the pandemic has caused a huge backlog on projects, now being released across companies globally. In addition, the increased consumption of consumables has led to a significant increase in demand for new equipment and spare parts.
Needless to say, all parts of the supply chain have to work closely together, but how does that actually work in an environment of shortage of materials, long delivery times and extreme volatile prices?
Valuable cooperation with our suppliers
"At AVK GUMMI, we have formed a task force, including management, sourcing, manufacturing, sales and R&D,” says Peter Lorentzen, Managing Director, and continues: “We work closely with our suppliers and customers to get the latest information on availability and priority of orders. Furthermore, we look for alternative solutions, and we have FTD (fast track development) in case a critical polymer or ingredient comes to a full stop. All of this of course in close dialogue with the customer, to enable rapid qualification and approval.
We benefit from long-term relationships with suppliers that focus on high quality. Often, we have been challenged by this strategic choice, knowing that well-documented, clean grades from well-reputed suppliers come at a price in comparison to cheaper grades from sources with less sustainable solutions and less traceability. Now, with low-cost driven market followers in search of alternatives to their dried-out sources, we benefit from the loyalty of our suppliers. Because of this loyalty, we often manage to get better allocations of shortened polymers and ingredients."
Only the best quality
An example of the above is carbon black – a functional ingredient providing improved mechanical properties and thus called a reinforcing filler. Carbon black is produced by combustion of a hydrocarbon source, requiring energy. The hydrocarbon source could be anything from pure methane to crude oil, and depending on the purity, carbon black could be either very clean or the opposite.
AVK GUMMI has always chosen the cleaner European alternatives while in particular the automotive industry has chosen cheaper grades coming from Russia. With the war in Ukraine, the import of carbon black from Russia has obviously come to a complete stop too, leaving the European automotive industry in an uncovered demand for high volume carbon black for tires, hoses, window profiles, etc.
So, not only has the price increased due to energy, but the sudden and extreme demand has made things go from bad to worse.
Thankfully, due to AVK GUMMIs long and strong cooperation with our suppliers, we can maintain supplies of the right quality, but again – the prices continue to go up and up.
Unstable energy prices
“Electricity is used for all our main processes: Mixing, vulcanisation, post curing etc.,” says Anders G. Christensen, Sales and R&D Director and adds: “Even though we have installed solar panels and continue to do so, they will not be able to cover the need. Therefore, we are exposed to market conditions like any other company in the free market.
During the autumn and winter of 2021, the price of electricity reached a level that could no longer be absorbed through continued improvement of internal efficiency, which meant that unfortunately, we were forced to pass this on to our customers.
Again, during the spring of 2022, more suppliers issued temporary surcharges on energy, and we considered to do this also. However, during the last few months, we have seen a small decline, so for now we are holding back, keeping a close eye on the development.
How the energy market will develop in the future, no one knows, but it is hard to imagine prices returning to the early 2021 level on a short horizon. What we can and will do is to further reduce our energy consumption and improve efficiency to maintain our competitive advantage.”