The COVID-19 pandemic caused a shutdown of the global freight transport system. Most of 2022 has been devoted to recovering the system to pre-pandemic levels. Overall, the rebound has not been entirely smooth. It remains to be seen how long the effects of any remaining disruptions impact the adhesive industry.
So far, we have noticed an overall increase in raw material prices, shipping disruptions, and variable consumer demand—all of which may continue into the new year, however, we are seeing some relief on some fronts starting to appear. Read our update on 2022 adhesive industry conditions below.
Supply Chain Disruptions
In the adhesives industry, disruptions to the sector’s supply chains have come in two forms: issues with transporting what is needed for production and distribution and issues with sourcing the raw materials and synthetic inputs used in the production process. Disruptions on both of these fronts have had the largest impact on the adhesive industry as a whole.
Disruptions in Transport and Logistics
With a shortage of workers and the initial consumer demand brought on post-pandemic, global freight collapsed as a result. Fortunately, the latter half of 2022 has seen a gradual recovery in freight efficiencies.
Right now, there is still a shortage of freight capacity globally. One problem is that North American freight has become more expensive due to a chronic redirection of freight to the continent. This has been brought on by persistent reductions in European freight capacity, which has struggled to return to its pre-pandemic levels.
Disruptions to the Supply of Inputs and Raw Materials
Extreme winter weather in North America at the beginning of 2022 caused a significant lag in production at facilities that provide the petrochemical-based inputs needed to make adhesives. This has created a crowding-out effect, where other sectors that use these inputs are competing with adhesive manufacturers to gobble up what’s available. When this happens, supply chain bottlenecks occur.
Restoring Price Stability
What happens to industry prices over the long run depends heavily on wages. If the firms that make these inputs have wage contracts that are due to expire soon, the risk is that they will demand higher wages to fend off elevated inflation. This results in higher prices for whoever buys the materials the factory produces.
Because a wage contract might last two or three years, the increases usually get passed on to consumers during that window of time. This is what causes inflation to remain for the long term. However, if the initial inflation stabilizes before wage contracts are renegotiated, any inflation will be temporary.
Prime Interest Rate Effects
What happens to the prime interest rate will also affect adhesive industry conditions. If interest rates rise too rapidly, there will be higher costs associated with financing any increase in productive capacity. This may further inhibit the road back to price stability. These factors will heavily influence the outlook for Canada’s economy and manufacturing markets well into 2023.
Get Your Adhesive Supplies Today
Do you need bulk adhesives for your business but are worried about the costs?
Reach out to the team at Bond Tech Industries today to lock in any orders for adhesives before they become any pricier. We’ll work with you to develop a custom order that perfectly suits your budget and your needs.