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Impact of Supply Shortages, High Prices on U.S. Manufacturers (Part II)

Posted by IndustryNet on Monday, September 13, 2021

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Earlier in the year, we reported on the severe supply shortages plaguing the U.S. manufacturing sector. These included (and continue to include) items such as steel, semiconductors, lumber, containers, and plastics. Since that article, published in March of 2021, the list of materials short on supply and increasing in price continues to grow. Consider that 94% of Fortune 1000 companies are experiencing supply chain disruptions from COVID-19.  In addition, extreme weather conditions have impacted the production of critical petrochemicals, creating a domino effect that has led to supply shortages and rising prices for a wide range of items.

As a result we’ve noted a significant rise in traffic to IndustryNet as millions of buyers flock to the site in search of hard-to-find materials at the best price.

Today, we’re taking a look at the specific materials that are in short supply right now,  and providing avenues for buyers to find local suppliers at the best price.

Prices at Record High, But Advance at a Slower Rate in August

In a report released Friday, September 10th, the Labor Department found that prices surged in August but at a lower rate than reported in July. The Producer Price Index, which measures the prices that producers get for final demand goods and services rose 0.7% in August. Although this represents the index’s highest annual rate since 2010, it has still eased from July’s 1% rate.

This data is similarly reflected in the latest Prices Index reported by the Institute for Supply Management, which found that although prices are at historic highs, prices were rising at a slower rate.

Looking at year-over-year data, the prices paid index has risen a record-setting 8.3% compared to this time last month—an increase not seen since the Labor Department began keeping records.

Materials and Commodities Up in Price

Some manufactured goods and raw materials have seen elevated prices for months now. According to the ISM, these include many types of steel products, such as hot rolled, scrap, cold rolled, and carbon steel, as well as aluminum and plastic resins, all of which have been elevated in price for twelve months or more.

Other items that have seen elevated prices for nearly a year include corrugated packaging, electrical components, packaging supplies, resin-based products, cement and polyethylene.

New on the ISM’s list of items up in price are adhesives, capacitators, electrical motors, caustic soda natural gas, hydraulic components, and pallets, which have experienced rising prices for the past 1-2 months.

What’s down in price? After more than a year of elevated prices, prices for lumber and wood has trended down.

Materials in Short Supply

Items such as semiconductors and steel have been in short supply for several months with shortages largely pandemic-related. Many steelmakers idled production amid the height of the pandemic and are still struggling with back orders, while the greater utilization of electronic devices amid the pandemic drove up demand for semiconductors, leading to a widespread shortage of chips.

Since our last report a number of new items have been added to the list of materials in short supply.

Resin Shortages: The “New Semiconductor”

The ISM reports resin based products are currently in short supply. These include epoxy, polyester, and vinyl ester resins, among others. The shortage was partly caused by the massive winter storms in the U.S. South earlier in the year, which shut down a number of chemical manufacturers in Texas. Meanwhile, a number of petrochemical plants were impacted by Hurricane Ida last month.

Millions of industrial buyers are flocking to IndustryNet in search of new suppliers. Want to make your company front and center? Learn more about our marketing solutions

Resins are used to make a dazzling range of products and currently more than 60% of manufacturers are reporting resin shortages. As a result, virgin resin prices have surged between 30%-50% compared to a year ago, according to AlixPartners. With 85% of the nation’s resin manufacturing being done in Texas, manufacturers can expect supply disruptions to continues, especially as climate change makes the region more suceptible to extreme weather events. Said Sudeep Sunman, Director at AlixPartners “Disruption is the new normal. Resin is the new semiconductor.”

Adhesives Shortage Sticking Around

On IndustryNet, we’ve seen more industrial buyers on the hunt for adhesives in recent months. This is likely related to an ongoing shortage of adhesives, which stemmed from the severe deep freeze suffered in the Gulf Coast in February. This historic weather event impacted the region’s massive petrochemical industry, severely limiting output of the raw materials needed by adhesives manufacturers. Industrial companies have reported a shortage of adhesives for the past two months now, according to the ISM.

Find adhesive suppliers on IndustryNet.

Paint Supplies Dry Up

At IndustryNet, we’ve also saw an increase in searches for paint in recent weeks, and this is likely due to the growing paint shortage noted in the news lately. A number of factors have contributed to a scarcity of paint, including surging consumer demand amid the pandemic and also the Texas deep freeze described above. As a result, paint prices are on the rise, up 10.6% year-over-year.

Looking for paint? Search hundreds of paint suppliers on IndustryNet here.

Supply Crunch for Packaging Materials 

As the pandemic continues to completely transform e-commerce, demand for all types of packaging including boxes, containers, and bags has skyrocketed, leading to a growing supply crunch. We’ve seen searches for various types of packaging materials surge accordingly on IndustryNet, while the ISM reports corrugated packaging has been in short supply for two months now.

Related: Neway Packaging to Showcase Box Making Machine at PackExpo Trade Show

If you’re looking to wrap it up, discover thousands of packaging companies on IndustryNet.

Shipping Woes

To make matters worse, a worldwide container shortage is still plaguing the sector, which has impacted manufacturers’ ability to source hard-to-find materials overseas. The shortage arose during the pandemic when manufacturers idled production and shipping volume slowed. Production in the U.S. lagged behind Asia, which meant exports from the United States and Europe did not recover quickly enough to send containers back to Asia.

This led to a bottleneck of containers being left at port in the U.S. and Europe, a scarcity of containers in Asia, and a subsequent rise in shipping costs. In fact, according to freight-tracking company Freightos, the spot price per container on the busy container lane between the U.S. East Coast and China has shot up 500% compared to this time last year.

Your Supply Chain Disruption Solution

Finding local suppliers has increasingly become a top priority among U.S. industrial companies. Search, sort and quote for free among 400,000 U.S manufacturers and 10,000 suppliers of parts, products and services on IndustryNet.

Want to stand out to buyers in search of your products and services? Learn more about our marketing solutions.

Sources

Sources: https://www.supplychaindive.com/news/resin-costs-plastic-manufacturers-industrial-buyer/605793/
https://www.cnbc.com/2021/09/10/paint-is-getting-costlier-and-harder-to-find-and-this-could-just-be-the-beginning.html
https://www.alixpartners.com/media/18053/the-resin-effect-tl-us-letter_v2.pdf
https://www.aiccbox.org/news/556789/Important-Update-on-the-Shortage-of-Key-Adhesive-Intermediates.htm

 

 

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