oil refinery
Sometimes, even the soundest supply chains are interrupted by major, once-in-a-century storms. A rare winter storm in Texas has unfortunately interfered with many industries, including the adhesive industry. Since the storm passed through, we’ve been experiencing a massive shortage in many water-based adhesives and hot melts and have seen the material costs for these products rise dramatically. This situation is expected to continue until at least late summer/early fall.

While our customers have our support, you may also want to understand how this situation has come about. Here is how the Texas storm in 2021 has impacted the adhesive industry.

1. Halted Production

When the winter storm in Texas hit, it shut down many refineries and downstream chemical processors. These facilities shut down in anticipation of the pending storm and deep freeze.  When refineries are shut down, we can’t get the by-products of oil and gas that we use in producing many water-based and hot melt adhesives. Restarting these production facilities is a long, careful and methodical process. For example, the inspection of pipes, which were reported to have been heavily damaged by the deep freeze, takes time and thorough testing.

As refineries open back up, they begin to produce our materials again, however, due to the challenges in re-opening, they typically must also raise their prices as a result of the supply backlogs.

2. Delayed Deliveries

Significant logistical concerns exist. A shortage of trucks and railcars to meet the pent-up surge in demand, resulting in bottlenecking. Finding sufficient freight was a major challenge.

If you’re interested in learning more about the current state of our industry or to get more information about our products, contact our team at Bond Tech Industries today.

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Fuel tanker truck driving in extreme winter conditions on highway

3. Backlogs

Once these refineries were back online, the backlog of demand for the raw materials required to make your adhesives was immense. This created a supply-demand scenario that triggered force majeure (allocation) and massive price increases for these materials. The backlog is so great that it is predicted to not clear up until at least late summer 2021.

4. Price Increases

Unfortunately, all this news led to significant price increases for your favourite adhesives. On average, we are seeing roughly 8-11% increases and in some cases ie specialty items, much higher increases. While we expect these inflated costs to be temporary, there are no guarantees that costs will return to ‘normal’…although we do believe there will be some relief at some point! Rest assured, your Bond Tech representative will immediately notify you of any cost reductions as they happen…Thank you all for your patience during these very difficult times. For more information, please contact our team at Bond Tech Industries today.

Sources:

https://www.ascouncil.org/blogpost/1268738/367375/ASC-Issues-Update-on-the-Shortage-of-Key-Intermediates?tag=Industry+News

https://www.cnn.com/2021/02/21/weather/texas-winter-storm-timeline/index.html

https://www.americanexpress.com/us/foreign-exchange/articles/global-supply-chain-management-weather-related-risks/

https://www.resolver.com/blog/natural-disasters-impact-supply-chains/

https://www.forbes.com/sites/willyshih/2021/02/19/severe-winter-weather-in-texas-will-impact-many-supply-chains-beyond-chips/?sh=6497cff0358a

https://www.cnn.com/2021/02/17/economy/winter-storm-business-impact/index.html

https://www.americanexpress.com/us/foreign-exchange/articles/global-supply-chain-management-weather-related-risks/

https://www.ismworld.org/supply-management-news-and-reports/news-publications/inside-supply-management-magazine/blog/2021/2021-03/the-texas-freeze-repercussions-and-risk-mitigation/

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