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Major Industries to Face Natural Rubber Shortage Globally

Published on 2021-08-27. Edited By : SpecialChem

TAGS:  Automotive    Electrical & Electronics    Medical   

natural-rubber-supply Rubber, a crucial raw material for various industries including the automotive, medical and electronics, is facing supply chain disruptions. The shortage of rubber could be associated with COVID-19 pandemic, climate change and shortage of shipping containers.

Natural rubber with its unique properties such as high durability, flexibility, and water resistance is invaluable for a wide range of products. These include high-performance auto and aircraft tires, electronic cables, and medical devices. No direct replacement material that possesses all these properties is currently available on the market.

Supply and Demand Imbalance Around the World

As supply chain managers continue to face the ripple effects from a global semiconductor shortage which has spread from the automotive industry to consumer electronics and household appliances, medical equipment and car makers are now on high alert due to the growing threat of scarce natural rubber supplies that has intensified over the past 12 months amid the global outbreak of COVID-19.

The extent of this new threat was underlined by the results of a new survey from the Munich-based Institute for Economic Research (Ifo) which found that 71.2 percent of German companies active in the rubber and plastics industry have been facing raw material supply shortages over the past three months, more than in any other German industry. Several key factors seem to play a decisive role in the current supply and demand imbalance: impacts from extreme weather; COVID-19 induced labor shortages in a handful of countries in Southeast Asia producing natural rubber; as well as strong demand for products such as medical gloves during the pandemic.

The global economy remains dependent on Asia for 90% of the natural rubber supply. For example, the U.S. imported $140 million worth of natural rubber in March 2021 alone, according to Census data.

Industries Brace for Impact

Keeping in mind the time required for rubber tress to mature and global need of the natural rubber, experts are anticipating price increase within the next few years as the available supply is unlikely to expand significantly.

Major car makers such as General Motors and Volkswagen have so far not experienced any shortage of natural rubber in their supply chains, while others such as Stellantis Group have announced that they are closely monitoring the situation. This contrasts with sub-tier automotive suppliers for which the growing scarcity coupled with the current turmoil in the logistics market — particularly following the Suez Canal closure in March 2021 — has already led to some supply chain adjustments. Michelin has been forced to expedite shipments from Asia via air freight instead of ocean. Despite this move, the company still had to slow down production at several plants since February 2021 due to shortages at its sites.

While tires account for about 66 percent of global demand for natural rubber, the raw material is equally vital for a number of non-tire automotive parts such as anti-vibration components and seals that are likely to also be affected by the current dynamics.
The construction, mechanical engineering, electronics, and shoe industries are also at risk of experiencing the effects of the growing natural rubber shortage.

Innovations to Look Forward To

bridgestone-plant-based-tireTo battle such raw material shortages and to have multiple sources within reach industry leaders and researchers are working constantly around the globe. Though the innovations are currently in their budding stages, they still could be the solution in the future.

In the list of such innovations falls the Bridgestone Group’s attempt to use guayule for tire production. The Bridgestone Group is conducting integrated R&D activities from cultivation technology, natural rubber extraction process to application to tires toward practical use of guayule.

Guayule is an evergreen shrub that originated in the arid zone from the southwestern part of the USA to northern Mexico and therefore can be grown in environments totally different from those suited for para rubber trees (the current primary source of natural rubber). Also, the rubber constituent contained therein is very similar to that of para rubber trees. Given these factors, guayule is expected to become a new source of natural rubber. In 2015, the Bridgestone Group produced the first tire made from guayule-derived natural rubber. This was an impressive step toward “expansion and diversification of renewable resources.”

On another front, Ohio State researchers are exploring how the dandelion can avert a critical national shortage of a natural rubber. The outcome of that research could avoid what one scientist calls the rubber apocalypse.

At Dr. Katrina Cornish’s laboratory she and her colleagues are cultivating a species of dandelion that could free us from dependence on external sources of natural rubber.
The Cornish Lab Group planted the equivalent of 61 miles of rubber root dandelions in field plots. Although that’s a lot of dandelions, there are many technical and logistical details that need to be explored before large-scale manufacturing capable of producing tires and other rubber-intensive products can occur. Large dandelion farms are one possibility, but another attractive option is hydroponics.

Other Alternatives and Feasible Options

During past rubber shortages, procurement professionals have turned to the petroleum-derived synthetic rubber as an alternative where possible, although the degree to which natural and synthetic rubber can act as substitutes is application-dependent. One can, however, expect synthetic rubber prices to also rise to a certain extent as a result of sharp increases of natural rubber prices, as was the case during both the rubber shortages of 2011 and 2017.

To mitigate rising procurement costs and limit the risk of having to buy on the spot market, companies should make sure to have secured enough natural rubber quota for their production forecasts in 2021 and, at the same time, prioritize concluding long-term contracts with suppliers for 2022. Given the current market situation, suppliers may be reluctant to agree on long-term contracts, so organizations could include additional surcharges depending on how market prices evolve.

Customers should work to identify which critical components in their supply chain are made of natural rubber and contact their sub-tier suppliers to assess stock levels of both these components and raw materials, and the degree of substitutability of these parts with synthetic rubber. Due to the possibility of extended shipping lead times of 3-9 months, particular attention should be paid in case order volumes have exceeded the initial forecasts as lower sub-tier suppliers could face challenges in receiving deliveries for additional volumes. Ultimately, end customers could intervene with raw material suppliers on behalf of their key suppliers in case delivery delays threaten to disrupt production.

Popular Natural Rubber Range

Sources: CNBC, Everstream Analytics, Bridgestone Group, The Ohio State University

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