Pricing: Suppliers and buyers 'should adopt more measured approach'

London: The rubber industry needs to return to a “balanced market without panic actions,” according to comments supplied to ERJ in response to current pressures on cost and supply of certain polymers and other compound ingredients.

This should, they say, be helped by a recent improvement in availability, with products that had been on allocation now readily available. That said, some processors reported that 25% of products are still in short supply

Among the polymer types most impacted are VMQ (silicones), which have seen a 300% increase in the last few months with further hikes still in the pipeline. And while FKM polymers is expected to stabilise after recent hikes of 30-40%, fluoroelastomer pricing looks set to remain at historic highs.

More generally, though, “there are enough capacities so shortages should not be occurring,” stated one industry player. The commentator, who preferred not to be identified -  linked the pricing and supply problems to dynamics triggered by the pandemic.

A continuing supply-vacuum that emerged after the rapid market recovery from the unprecedented slump in Q2 2020,” he explained, adding that this has led to “hoarding” behaviour among buyers.

Purchasers, noted the industry insider, have also been unsettled by trade protectionist measures, particularly in China, Europe and NAFTA, and the “sudden environmental shift, which the market was not ready for.” 

Energy prices have been another driver: some synthetic rubber suppliers imposing ‘energy surcharges’ in a range of €40 to €500 per tonne, with further such increases -  in a €60-120 range - expected during the fourth quarter.

According to the commentator, suppliers that introduce such measures “have reacted in panic, which again reflects the market situation, rather [remaining] cool and seeing what happens.”

With the market rebound in the final quarter of 2020, compounders and processors found it relatively easy to pass on price increases to end-user customers, who “just wanted any material at any cost.” 

But, he said, the situation is now very different: “As markets are slowing down, especially automotive, there is basically no way to pass on cost. The market mentality would need to change, meaning that some suppliers should just stop delivering if cost [rises] are not accepted.”

Based on article published in the Novenber.December issue of European Rubber Journal magazine