image

imageJune 21, 2021

Unprecedented Raw Material Disruptions and Shortages Challenge Industry

The current wave of chemicals shortages and associated inflation is extraordinary and broad-based. So, how did we get here? This supply dynamic began with production curtailments throughout the supply chain, from oil refineries to chemical producers, during the early days of the Covid-19 pandemic. Inventory supply was further eroded in late 2020 with an active hurricane season in North America.

The resulting inventories were at record lows when Winter Storm Uri hit in February this year, causing even further destruction of chemical supply. With most of industry capacity offline, many chemical producers declared force majeure, informing their customers that their limited supply would be allocated only to customers with contracts, at much less than historical usage.

In addition to North America, there were multiple significant force majeure announcements by major producers across many markets in Europe and Asia—driven partially by U.S. shortages, but also by other independent issues prior to and since Winter Storm Uri. Global chemical supply chains have never been so damaged in unison at one time.

During this time of supply shortages, global demand has been increasing. This demand is being driven by the recovery from the Covid-19 pandemic, as more people are vaccinated and economic stimulus increases demand.

This supply – demand imbalance has also had a significant impact on the price of materials. Chemical inflation estimates are currently double digit. For perspective, the Industrial Chemicals component of the U.S. Producer Price Index (PPI) is now running at a 47-year high. The last time the PPI Chemicals Index was up this much was June 1975.

Fortunately for RPM, the MAP to Growth program has been focused both on efficiency and resiliency. Our center-led procurement team, in collaboration with RPM’s four operating groups, shifted the company’s philosophy of decentralized spot buying to aggregated sourcing, with an emphasis on building more strategic relationships. As a result, RPM’s supply reliability is much better than it would have been as producers declared force majeure and then severely limited or stopped supplying their non-strategic, non-contractual customers.

The center-led procurement team had also developed much better market-sensing capabilities and sounded the alarm bells on the shortages and inflation early. Where we had only updated prices annually, we have been doing so monthly in this highly volatile time.

The stress of the current environment has fostered deep collaboration between RPM’s operating groups, center-led procurement team and suppliers. Close communications have become more important than ever as potential shortages are addressed with action plans, coordination with strategic suppliers, seeking out new sources, and nimble substitution of materials and/or formula changes where possible.

The resourcefulness RPM has exhibited in this crisis has been remarkable. For example, there were multiple times we reallocated materials across groups, helped suppliers source feedstocks and tolling capacity, and even processed off-spec epoxy materials through Arnette Polymers so we can continue to service our customers. Finally, our resourcefulness has enabled continued acquisition growth. A company that RPM recently acquired had been suffering lost revenue opportunities because they had been spot-buyers. Once part of RPM, we helped them secure needed raw materials, which has helped them regain their sales presence.

In this once-in-a-lifetime challenge, RPM is stepping up collaboration and demonstrating resilience to address raw material shortages. Let’s keep the “connections creating value” momentum going!

Sincerely,

portrait-short-sullivan-mike

Michael H. Sullivan
Vice President – Operations & Chief Restructuring Officer
RPM International Inc.

portrait-short-kinser-tim

Timothy R. Kinser
Vice President – Operations
RPM International Inc.

Welcome to RPM's Around the World Blog

This blog shares inspiring stories about how RPM companies are coming together, in light of the COVID-19 health crisis, to help build a better world—and the incredible impact RPM associates are having on their colleagues, families, communities, customers and suppliers around the world.

Want To Share Your Story?

We want to know how your RPM company is
helping to Build a Better World.

image
image

Congratulations to our Earth Day trivia WINNERS!

LYNN MATTOON – Stonhard Content Manager



image

Featured: RPM's Compliance Annual Meeting

RPM’s Compliance team hosted their Annual Meeting virtually on April 19-20, with over 250 attendees from many RPM businesses with attendees from Australia, Asia, Africa, Europe, the Middle East,...



image

The Solution Spot: Carboline’s Thought Leadership for the Digital Age

Carboline’sSolution Spot bloggrew out of the company’s longstanding belief that “there is always a solution” for the problems customers and partners face. The Solution Spot is just as its name...



image

Broadbean: Expanding Our Reach

RPM is using Broadbean to help with online job recruiting. Broadbean is a job board aggregator service. It will be used by RPM businesses across the US to expand our reach from a diversity...



image

Name Our Mascot!

Submit your mascot name for a chance to win Building A Better World swag! The person with the selected name will win. Please submit by May 31st.



image

Building a Better World Party

Save the Date! 



inspire
GET INSPIRED

I would like to receive emails with RPM’s latest Around the World blog posts.





logowhite

RPM International Inc. is a world leader in specialty coatings, sealants, building materials and related services. Learn more at www.rpminc.com.

168

Our founder’s favorite number. It’s the number of hours in the week and reminds us to use our time wisely.

Copyright © 2020 RPM International Inc.