Rubber Shortages Become Latest Problem for Auto Industry
Those of you tracking the semiconductor shortage can probably take it easy for a while, as practically every industry group on the planet has tentatively agreed we’ll be seeing a chip deficit for a few years. Meanwhile, market analysts are trying to predict the next material we won’t have enough of and rubber is looking like an ideal candidate.
Rubber supplies are drying up and price increases are reportedly beginning to climb at an untenable pace. Despite several years of relatively stable availability and low prices, supply chain disruptions created by lockdowns have left latex harvesters in a bad position. Low prices encouraged many to over harvest their existing crop, rather than invest in farmland. But with shortages looking probable as countries began responding to the pandemic, China went on a buying spree to maintain a robust national stockpile in 2020. The United States was late to the party and now finds itself in a position where scarcity is driving rubber prices through the roof just when it needs to buy more.
“The supply issues that we’re seeing now, they are structural,” said Meyer, who now works as a managing director for Angsana Investments Private Ltd. in Singapore. “They will not change very soon.”
But the issue is actually a lot bigger than the rubber problem. Many are arguing that we’re seeing the dangers of global supply chains and just-in-time manufacturing practices manifesting in real-time. With lockdowns having disrupted practically every industry in existence, all sorts of materials and components are becoming increasingly difficult to come by. Regional issues frequently make these issues worse. For example, Asian markets aren’t suffering quite so badly from the semiconductor shortage due to the location of the facilities responsible for their manufacturing and it’s a similar story with latex — as Thailand, Indonesia, Vietnam, China, and India are the world’s largest producers of natural rubber by far.
Carmakers including Ford Motor Co. and Stellantis NV, formerly known as Fiat Chrysler, say they’re monitoring the rubber situation but have yet to feel an impact. General Motors Co., similarly, says it isn’t worried about its rubber supply. France’s Michelin, one of the world’s largest tire makers, is skirting port congestion by using air freight shipments direct from Asia.
But for suppliers reliant on U.S. distribution, rubber is already a concern.
“I’ve got everybody alerted that I’ll take materials as fast as they can get it to me,” said Gary Busch, director of global procurement at Carlstar Group, which makes tires for off-road and agriculture vehicles.
Natural rubber [or latex] is produced from the white sap of trees found in the warm, humid climates of countries such as Thailand and Vietnam. While petroleum-derived synthetic rubber is preferred for some applications, the natural version has properties that are critical for products such as gloves and packaging tapes — both of which have seen demand rise during the pandemic. And as the critical component in tires and anti-vibration parts under the hood, it’s more closely associated with the auto industry than any other.
While the United States and Europe use substantially less rubber than a country like China, they also don’t have any meaningful stockpiles of the material to speak of (unless the giant Uniroyal tire turns out to actually be made of rubber) and fewer ways of sourcing their own. Something tells us that might eventually become something the government will push to change, though it could be too late to effectively mitigate whatever disaster we’re heading into. Rubber is just the latest in a laundry list of material shortages we’re being warned about. Just about every metal that does into electronics is also showing a spike in demand, with some (e.g. copper and cobalt) likely experiencing massive shortfalls over the next decade.
But there’s a problem with just trying to source more. It takes about seven years until plants can produce a sufficient amount of sap for rubber and establishing new mines for precious metals usually takes a minimum of five years. These are just minimum estimates, however. A few bad seasons can delay rubber tree maturation by years and mining operations frequently run into prolonged setbacks after the initial planning phase is underway. We envision plenty of problems moving ahead, with petroleum byproducts being used to create even more synthetic rubber in the West.
[Image: Joseph Sohm/Shutterstock]
Consumer advocate tracking industry trends, regulation, and the bitter-sweet nature of modern automotive tech. Research focused and gut driven.
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