2020 was a very trying year for business as we know it, but the coatings industry actually registered a substantial double-digit year-over-year growth. Since then, the market is still grappling with other extremely serious issues as we speak. At the moment, its single biggest problem is without doubt the colossal disruption of the global raw materials supply chain. Most of the key raw materials for manufacturing coatings are currently produced in China. Since the pandemic struck, few of these ingredients are finding their way out of the country. Since China has been experiencing a “V-shaped” recovery pattern from COVID-19 infections, most of their industries are currently running at full capacity. This has forced them to make use of numerous coatings raw materials that they would ordinarily place on the export market.
The few raw materials which are placed in the export market take months rather than weeks to find their way to America. This has gone on to trigger steep price hikes, particularly for the raw materials utilized to make epoxies and resins. This is also the case for almost all sorts of coatings across the board including those in use in the automotive, aerospace, and even industrial sectors. The ultimate result of this unprecedented supply chain crunch is these high prices are being passed down to consumers. Since the latter part of 2020, epoxy prices in the United States have doubled and, 2 years on, show no signs of leveling off.
Also, there is limited availability of titanium dioxide, a key ingredient in many coating products. This shortage arises from the same issue, as China produces more than 50% of the world’s titanium dioxide.
What are the factors that are complicating the American coatings supply chain issue?
Besides the raw materials availability problem, there are yet other problems which are complicating the US supply chain crunch. There is currently a shortage of shipping containers and container vessels operating globally. In most places including America, shipping fees have either doubled or tripled over the past few years. Fluctuations in the global labor market attributable to the COVID-19 restrictions have caused the normal operations of many seaports to slow to a crawl. In some situations, ships have been obliged to wait for weeks on end before they can be unloaded. The moment they are eventually unloaded, there tends to be a short supply of gate appointments.
For those who might perhaps be in the dark, gate appointments are passes that allow transportation companies to load goods onto their trucks once they are unloaded from ships. Yet even when these companies do obtain gate appointments, there is still a shortage of trucks and their drivers to get those goods to the end-users. In the particular case of America, this state of affairs has been further compounded with other issues. For years now, exports have been on the decline. This has gone on to create an increasingly “one-way” trade that is exerting more pressure on the normal supply chain movement and port management.
What is the forecast for the US supply chain crunch to be solved in a timely fashion?
While these supply chain issues are serious, there are still clear signs that things will ultimately take a turn for the better in the foreseeable future. In the first place, as the COVID-19 pandemic begins to ebb and the country’s economy stabilizes, this supply chain crunch will only be bound to iron itself out. This includes the various problems that have been triggered by the escalating trade deficit, which are essentially simply a matter of logistics. The moment the demand for raw materials starts to decline, their flow from China, along with that of precursors, will resume and the coatings market will finally normalize.
It is important to note that the pandemic by itself is not solely to blame for this issue. Many of the United States’ supply chain troubles can be simply attributed to plenty of ill luck. For instance, the freak Texas freeze that occurred in early 2021 is partly to blame. This is because it paralyzed the oil and gas sector, together with the petrochemical plants, which are key suppliers of chemical products for America’s coating industry.
On the upside, these supply chain issues have also fast-tracked many advancements in the sector which have been in the making for years before the pandemic struck. For example, there have been a number of mergers and acquisitions by key industry players. This has, in turn, heightened collaboration and even diversified the nation’s supply chain. Also, the issues which were triggered by China’s continued monopoly on coatings ingredients have led some industry players to rethink their heavy reliance on Asian raw materials. For example, Dow has announced its intentions to construct an MDI plant in Texas which is slated to expand production by no less than 30%. Lastly, stricter regulations have pushed the coatings industry to make a shift toward green solutions and these efforts are beginning to bear fruit. Some of the green solutions finding their way into the market are low to no-VOC coatings and fully automated coating systems. The latter of which are much safer and quicker upon comparison with manual coatings systems.
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