1 June 2021

Raw material crisis affecting supply and price of printing inks

By Tom Bowtell, CEO BCF

The coatings industry is suffering from a major raw material crisis - on a scale that no one I talk to can remember, highlighted in a quote from one of our members - "I can honestly say that in my 24 years within the industry I have never seen supply issues and price increases on the scale we currently face."

This started towards the end of 2020, and a combination on events and factors have combined to create a really difficult situation for the industry, just as demand has started to return in sectors like industrial coatings, and strong demand remains in the decorative sector. There are real concerns that the sector will not be able to meet the demand from UK manufacturing and construction, which will potentially impact the recovery post covid. Consumers may also start to see paint shortages on the shelves, so we have already alerted the Business department in Government.

At the end of April we asked for feedback on the current status of the issue, and we received input from across our paint, coatings, and printing ink members, as well as associate members, including both raw material suppliers, chemical distributors and packaging manufacturers.

The first thing to note is that there is a very wide range of raw materials affected. Whilst solvents and resins were most commonly referenced as being in short supply, there seem to be growing problems accessing pigments. Packaging materials have been hit hard too with global shortages of pulp and polymers impacting on cardboard and plastics. In all, problems accessing over 30 different raw materials were mentioned by members replying to our request for more information, with decreasing availability leading to increasing costs. To quote a member directly:

"About 85% of our raw materials have been affect greatly: resin, monomers, pigments and additives. There are not really any raw materials that are not affected."

What is causing these shortages? Reasons seem to span the global, regional, and local. Broadly, the issues seem to be:

• Force Majeures - Over 40 incidents of force majeure have been declared this year alone. The biggest problems seem to have been the freak weather in Texas causing a shutdown there and a fire at a major plant in Europe. The impacts from these are still unwinding.
• Covid-19 - Lockdowns and factory shutdowns have impacted, with the current terrible situation in India beginning to bite in particular.
• Unprecedented global demand - While some parts of the world are locking down again, others are starting to open up, leading to strong consumer demand. Moreover, in some countries, like China, governments have not re-opened certain areas of the economy for export, retaining RMs for internal use.
• Shipping - Lack of, and cost of, shipping containers, although this is partly linked to the pandemic too.
• Brexit - Delays at ports in Europe and UK also are still causing delays and congestion, with some hauliers still avoiding making trips to the UK, especially in the case of consolidated shipments.
• Oil prices - Oil prices have increased globally.
• Maintenance - Planned maintenance shutdowns at factories have been hitting at the same time as all the other issues cited above.

The consequences are that BCF members have been struggling to access many raw materials and increasingly are being placed on allocation by suppliers. Some suppliers are not taking any new business and only providing to established customers. Deliveries are inconsistent and delays of 10 weeks or so are being reported. There is a lack of certainty around supply dates - some members state they do not know when supplies will arrive and often only get a phone call when a delivery is on the road. As one member told us:

"The raw material supply appears to be a lottery - production sites do not know what is on the delivery trailers until they unload."

All of this, in turn, means BCF members are starting to have to place customers on allocation themselves, and to pass on price rises down the supply chain.

Because so many of the problems are down to global trends and demand, it is difficult for proactive mitigation measures to be put in place. However, BCF has been working with the Chemical Industries Association to keep senior officials at the Department of Business informed of the ongoing situation. We have agreed to keep in regular touch and will continue to feed our members' experiences into Government.

How long will this situation last? The more optimistic companies say they expect the situation to ease in Q3 2021. Others fear problems will continue into next year, at least for certain products. A ‘wisdom of the crowds' average suggests it will be Q4 this year before things will improve significantly. We will of course keep members informed as we find out new information.

Source: Tom Bowtell, CEO BCF (British Coatings Federation)