Rubber Shortages Become Latest Problem for Auto Industry

Matt Posky
by Matt Posky
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]

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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.

  • Lou_BC "Owners of affected Wrangles" Does a missing "r" cancel an extra stud?
  • Slavuta One can put a secret breaker that will disable the starter or spark plug supply. Even disabling headlights or all lights will bring more trouble to thieves than they wish for. With no brake lights, someone will hit from behind, they will leave fingerprints inside. Or if they steal at night, they will have to drive with no lights. Any of these things definitely will bring attention.I remember people removing rotor from under distributor cup.
  • Slavuta Government Motors + Government big tech + government + Federal police = fascist surveillance state. USSR surveillance pales...
  • Johnster Another quibble, this time about the contextualization of the Thunderbird and Cougar, and their relationship to the prestigious Continental Mark. (I know. It's confusing.) The Thunderbird/Mark IV platform introduced for the 1971 model year was apparently derived from the mid-sized Torino/Montego platform (also introduced for the 1971 model year), but should probably be considered different from it.As we all know, the Cougar shared its platform with the Ford Mustang up through the 1973 model year, moving to the mid-sized Torino/Montego platform for the 1974 model year. This platform was also shared with the failed Ford Gran Torino Elite, (introduced in February of 1974, the "Gran Torino" part of the name was dropped for the 1975 and 1976 model years).The Thunderbird/Mark series duo's separation occurred with the 1977 model year when the Thunderbird was downsized to share a platform with the LTD II/Cougar. The 1977 model year saw Mercury drop the "Montego" name and adopt the "Cougar" name for all of their mid-sized cars, including plain 2-doors, 4-doors and and 4-door station wagons. Meanwhile, the Cougar PLC was sold as the "Cougar XR-7." The Cougar wagon was dropped for the 1978 model year (arguably replaced by the new Zephyr wagon) while the (plain) 2-door and 4-door models remained in production for the 1978 and 1979 model years. It was a major prestige blow for the Thunderbird. Underneath, the Thunderbird and Cougar XR-7 for 1977 were warmed-over versions of the failed Ford Elite (1974-1976), while the Mark V was a warmed-over version of the previous Mark IV.
  • Stuart de Baker This is depressing, and I don't own one of these.