From paints to plastics, a shortage of chemicals is igniting prices
In an economy shattered by the pandemic, shortages and price spikes are now severing one of the humblest but most vital links in the global manufacturing supply chain: plastic pellets which come in a vast array. of products, ranging from grain bags to medical devices. , from automotive interiors to bicycle helmets.
Petrochemicals, which are made from petroleum, have encountered their own problems: an abnormal winter frost in Texas, a lightning strike in Louisiana, hurricanes along the Gulf Coast – all conspired to disrupt production and increase prices.
“This is another in a series of disruptions in the supply chain of many industries,” said Christopher Geehern, executive vice president of Associated Industries of Massachusetts. “The prices are going up. “
The price of ethylene – arguably the world’s most important chemical, used in everything from food packaging to antifreeze to polyester – has jumped 43%, according to Independent Commodity Intelligence Services.
The root of the problem has become familiar in the 18 months since the pandemic triggered a brief but brutal recession: As the economy slumped into virtual paralysis, petrochemical producers, like manufacturers of all types, have scaled back their production. So they were caught off guard when the unexpected happened: the economy quickly rebounded and consumers started spending again at astonishing speed.
Ford Motor Co., hampered by an industry-wide shortage of computer chips, is now also lacking other parts, some made from petrochemicals.
“Small businesses, currently facing significant labor shortages, also struggle to ensure products are on the shelves,” said Christopher Carlozzi, state director of the National Business Federation. independent.
In the federation’s most recent national survey, more than half of small business owners reported moderate to severe supply chain issues and said the problem was getting worse.
“If consumers visit your establishment and cannot find the products they are looking for at affordable prices, they may not come back,” said Jon Hurst, president of the Retailers Association of Massachusetts.
The pandemic is also forcing manufacturers to rethink some of their practices. For decades, companies have moved production to China to take advantage of falling labor costs.
“The pandemic has shown that extensive supply chains and factories halfway around the world are not really the most efficient way to create products. Said Jay Zagorski, an economist at the Questrom School of Business at Boston University.
Manufacturers have also reduced their expenses by keeping inventory to a minimum. They only bought equipment as needed to fill orders. But as the recession and the recovery have shown, they have done so with great risk.
“The world has a very integrated supply chain,” said Michael Klein, professor of international economics at the Fletcher School of Law and Diplomacy at Tufts University. “It’s a good thing, but we are now seeing some of the vulnerabilities. “
Herald Wire Services contributed to this report.