company news
Industry News

Supply and Demand Driving Costs Higher in 2021

updatetime:2021-05-19 11:54:45



Supply and Demand Driving Costs Higher in 2021

North America

FEEDSTOCK AND ADHESIVE RAW MATERIAL UPDATE

While supply is expected to improve, many key feedstock and raw material suppliers remain on force majeure or sales allocation.

Purchasing off spot markets is feasible for some raw materials but comes at high expense (ex. spot market price for VAM is at a record high in April and is more than double the price 6 months ago).

Market will remain short to tight depending on the material for the rest of the year as suppliers recover and replenish global stocks.

The supply chain remains vulnerable to any unplanned issues as most manufacturers have little to no inventory (ex. hurricanes, unplanned maintenance, logistical issues, etc.).


FREIGHT RATES CONTINUE TO RATES CONTINUE TOICA


Truckload and LTL freight rates continue to rise:

According to C.H. Robinson, a large logistics 3PL in the U.S., the industry will continue to experience sustained tension due to robust freight volume demand and supply issues caused by shortages in key labor pools and drop in new truck manufacturing impacted by short semiconductor market. Truckload rates up another 6-8% since February 2021 with national  tender demand at all time highs with no sign of slowing.LTL costs are increasing while capacity is shrinking, forcing shippers to use higher cost carriers. Actual cost per 100lbs is up more than 30% compared to last year, and 13% in the last 3 months.

Sea freight costs remain 400% higher than pre-COVID on lanes out of Asia Pacific.

Constraints on sea freight containers have caused a volume shift from sea to air freight. And air freight rates are no better. Air cargo tonnage continues to increase in most trade lanes – pricing is now 147% higher than same time last year, with air freight rates from Asia to the US having more than doubled in the last month.

FEEDSTOCKS AND RAW MATERIALS: WHAT HAS CHANGED IN THE LAST FEW MONTHS?

From late 2020 to March 2021 we saw significant increases in key feedstocks and raw materials into the adhesive industry. In Table 1 on this page you'll see those increases in the "March 2021" column. In just the past few months additional cost increases on our key raw material and feedstocks have been announced or implemented. This is reflected in the "Additional" column in Table 1.

INFLATIONARY PRESSURES WILL CONTINUE TO DRIVE COSTS UP IN 2021

The Consumer Price Index for All Urban Consumers rose 2.6 percent for the 12 months ending March 2021, the largest over-the-year increase since August 2018.

Supply chain disruptions paired with unprecedented volatility in demand means costs will stay high in 2021.

The Employment Cost Index noted that labor costs had their largest rise since 2007 in Q1 as companies competed for workers to boost production to keep up with demand.

OUR COST TO SERVE HAS INCREASED

In addition to material and freight increases, the cost to serve our customers in this environment has increased.

In order to meet customer needs we continue to expedite more materials, execute shorter manufacturing runs,

split more deliveries, and utilize alternative, higher cost sources and service providers to ensure supply and delivery. In order to continue our level of service,  we must increase our prices. We appreciate your patience, collaboration and flexibility as we work through these challenging times together.