Rubber Shortages Become Latest Problem for Auto Industry

Matt Posky
by Matt Posky
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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.

Natural rubber prices hit a four-year high in February at $2 a kilogram. But market experts are claiming they’re actually just starting to pop off. Robert Meyer, the former CEO of the rubber firm Halcyon Agri Corp., told Bloomberg that he envisions prices reaching $5 per kilogram within the next five years.

“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.

From Bloomberg:

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]

Matt Posky
Matt Posky

Consumer advocate tracking industry trends, regulation, and the bitter-sweet nature of modern automotive tech. Research focused and gut driven.

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  • Art Vandelay Art Vandelay on Apr 14, 2021

    Maybe that idiot on YouTube that put the wagon wheels on the Hellcat was on to something.

  • Daniel1967 Daniel1967 on Apr 16, 2021

    We are on our second Honda (1998 Civic, sold, 2011 CR-V AWD, daughter drives it now) and our second Subaru (2002 Forester, sold, 2013 Forester, wife's car). The 2011 CR-V is the best vehicle I ever owned (had new Nissan Maxima, Ford Taurus, many others, currently own a 2017 CX-5 Grand Touring AWD). There is no question in my mind that Hondas are better vehicles. Better engines, better transmissions, better suspensions you name it it's better. The only thing Subarus have for them is the AWD system which is slightly superior, and for current models, much better visibility. And wife likes Subarus so end of the story. I would take a Passport or Pilot over this any day.

  • MaintenanceCosts I've worked 4-day weeks in previous careers. Unfortunately, my current business requires responsiveness to clients on all five business days, so it's not really an option for me right now.But 4-day weeks are outstanding. The longer weekend leaves you with a true day of rest after you complete all of the errands and chores that we all have to do throughout most of our weekends. I, at least, felt so much better during the work week when I had that third day off. Based on my own experience, I'm fully prepared to believe the studies and anecdotal reports that say employers are experiencing no drop in productivity when they move to a 4-day schedule.
  • FreedMike Pour one out. Too bad FCA let this get stale - I was always a fan of this car.
  • Theflyersfan I'm still trying to figure out the meaning of the license plate. This'll be the hill I'll die on, but I think this was truly the last excellent E-class model (W124). In 1995, for 1996, the W210 "radical front" quad headlight model was released and all signs pointed to this being the first model being built to a price point and not to engineering excellence, cost be damned. Future models were nice looking and had all of the latest tech, but for those of a certain age (read: older), the upright, wood-lined interior with the clickty-click buttons and the aroma of the old leather Mercedes used - that is the Mercedes that some of us remember. For $2,500, this Benz could be an interesting project car for someone with deep pockets and infinite patience. It's cheap enough to where if you get started and then realize that this will nuke the budget, you'd still be able to sell it and recoup something.
  • Tassos These cabrios, while mechanically identical to the sedan Es of the time, were incredibly expensive, $80k when the sedan was barely $40k, in 1990s money. This does NOT mean an $80k car today, but an $160k car or MORE.AND with $160k today, you can get the most wretchedly excessive E class AMG version.(Not the S class AMG 65 tho, this will set you back $250k worthless Biden dollars).Back to this cabrio, it's a great, timeless design that looks and feels solid, yet when you sit in the cabrio, and I did, it does not feel half as safe as in the Sedan or Coupe.The engine is way underpowered compared even to the one in the Es of 10 years later, gas or diesel.They are also smaller and lighter (the sedans) than their 'kids' and 'grandkids"This may make a good COLLECTIBLE 10 years from now. As a daily driver, it is rather spartan today, except for the luxury interior.Again, this is yet another one of Tim's collectibles misposted as daily drivers.PS the Great Bruno Sacco designed this E class series, as so many other iconic Mercs. But you need to have TASTE to appreciate the smooth design.
  • Lorenzo The 300 sedan was the last of the RWD American freeway cruisers. Even the somewhat decontented later year models were still the most comfortable rides on 200+ mile freeway trips. It was also formidable to smaller car drivers: I rented one for two weeks, and not one driver in a Corolla or Civic tried to cut me off! That was a constant occurrence with my Buick Verano.
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