Summer 2022 continued to see pricing and supply issues within the Composites sector and further afield into most other markets. Although there are indications that the European supply situation is starting to improve, and freight costs are starting to reduce, material costs are still high. Traditionally the trend of sales prices is linked almost exclusively to the movements in raw material costs, however, the additional cost elements of currency, inflation, energy etc have not yet been realised within product costs. It is reasonable to expect a realignment may be required to reflect these extra costs, particularly as their impact looks to be long lasting, and they are at high levels. There is concern that continued energy cost increases will mean that countries such as Turkey and China which still have low energy costs, will become more cost competitive.
Key factors affecting the material market:
- Although the oil price has fallen to below $100 per barrel again, there is a disconnect between this and derivatives due to energy costs – Brent Crude Oil latest price chart
- Sterling has fallen in value against the Euro – transactions from Europe are done in Euro so it is more expensive to import.
- Ongoing shortages of labour are a brake on the manufacturing industry across Europe
- Concerns of long-term energy and overspill from Ukraine remain.
- Shortages of Titanium Dioxide continue with loss of a key production site in Ukraine.
- Cost and availability of speciality raw materials remains problematic
- Significant concern over energy related raw material shortages as Europe moves into the winter months.
- Europe has a heavy reliance on China and the Far East for glass fibre and a resurgence of internal Chinese manufacturing sector will affect European supply.
- Other industries are competing for the same limited supply of material.
The impact is across all resin systems and speciality chemicals, reinforcements, including glass and carbon fibre, organic peroxides, and many others.
In addition to the above, the UK inflation rate remains above 10%, although recent announcements on energy caps should prevent the extremes previously predicted. UK government is borrowing at a rate of 4.5% and increased domestic interest rates are likely. OECD continues to forecast a global recession; however, most banks are predicting that this will be short-lived and shallow due to underlying levels of demand.
Composites are a key enabler as we increase our sources of renewable energy, with electrification of the transport systems and longer term as we develop towards hydrogen systems. Thus, supply v demand will become more critical.
The message to Composites UK members is:
- Things are likely to remain difficult for some time
- Plan ahead as supply of ALL materials will remain tight
- Make sure your supply chain is robust to ensure you have what you need to maintain production
For more information on raw material prices for the composites sector:
Tecnon Orbichem: https://www.orbichem.com/
Independent Commodity Intelligence Services: https://www.icis.com/explore/
Composites UK member resources – Material Supply Information: https://compositesuk.co.uk/member-resources/business-development/material-supply-information/ (login required)