Post published:March 1, 2022
From our perspective as a decades-long supplier of rubber process oils and extender oils, the outlook for rubber products makers in the first quarter of 2022 is a mostly positive one.
The year to come will not be without its challenges, however.
In a recent Rubber News article by Bruce Meyer, our Renkert Oil’s VP of Marketing and Sales Mike Burnett gave his take based on 40 years serving this industry.
What Mike provided was essentially a SWOT analysis – strengths, weaknesses, opportunities, and threats – for makers of natural and synthetic/EPDM rubber products and thermoplastic elastomers.
Strength: Balanced Process Oil Supply
At the moment, it appears availability for the process oils the rubber industry relies on should be right on target. Despite setbacks in 2021, production in this sector has caught up to demand.
Supply of Group II, III – even Group I base stocks, for the time being – are looking stable. Mike looks forward to this trend continuing for the foreseeable future.
“We see supply for 2022 being good, even with a lot of Group II refineries going through planned shutdown/turnarounds. We feel that supply will be balanced during 2022 and not short or high.”
Weakness: Rising Prices
The price of rubber products – along with just about everything else – is rising sharply. As Forbes reports, U.S. inflation is at its highest level in 40 years.
- The consumer price index increased 7 percent in 2021, the largest one-year increase since 1981.
- Wholesale prices spiked the fastest ever last November, at 9.6 percent.
- Oil prices have hit a seven-year high.
At the same time, the average wage growth in the U.S. was only 4.7 percent, far less than inflation. Consumers are feeling the pinch.
Mike believes that this trend is eventually going to curb consumer demand for rubber products.
“My concern for 2022 … is when you look at the inflation rate and it continues to climb, sooner or later that’s going to impact the disposable income of the consumer.”
He added that pricing needs to be addressed this year somewhere, whether that be in the cost of transportation, operations, raw materials, or myriad other pain points.
Opportunity: Strong Demand for Rubber Products
For now, however, demand is high and looks to hold through the year and perhaps beyond.
According to the International Rubber Study Group (IRSG), makers of natural rubber and synthetic rubber products worldwide saw a strong post-pandemic rebound (no pun intended) in 2021.
2021
- Natural Rubber: 9.4% increase
- Synthetic Rubber: 9.5% increase
Some leveling off is expected after this rebound year, but the IRSG anticipates ongoing growth in demand:
2022
- Total Rubber Demand: 3.6% projected growth
2023-2030
- Total Rubber Demand: 2.3% projected growth YOY
Mike is cautiously optimistic about these numbers, which will only remain strong with some easing of our current pricing pressure.
Threat: Supply Chain
While supply and demand may be pretty well balanced, getting raw materials from point A to point B remains the greatest challenge of this economic season.
Among the stressors on the global supply chain, two trends stand out:
- Trucking shortages. There just aren’t enough drivers right now, particularly for long-haul routes, leading to unavoidable delays in overland shipping.
- Limited overseas shipping space. We’ve seen increased competition for ISO container space as well. (For the first time, we were kicked off a ship last year after being outbid!)
Mike said that thankfully, there is a lot of empathy out there.
“Realistically, every supplier is having problems and experiencing the same problems … all of us are going through the same thing in the supply chain.”
Renkert Oil is managing this threat as we always have in times of supply insecurity.
By maintaining high levels of inventory – “operating from the top of the tanks instead of the bottom of the tanks,” as Mike says – we’re keeping all our specialty oils flowing to our contract customers.
The Outlook for Rubber Products Is Brightest with Experienced Supply Partners
Just as in every SWOT analysis, we’ve revealed challenges we can’t control as well as those we can mitigate with strategic planning.
Supply chain deficiencies, inflation, and related pricing pressures across the board are factors that are beyond us. The best we can do is continue to look for ways to improve efficiency and control costs wherever possible.
But supply security is an area where we’re making a difference. To ensure we are as competitive as possible in this area, we have made strong investments in:
- Infrastructure to maintain high inventory levels.
- Redundant supply points across North America and Europe.
- Ongoing contracts with Chevron, Neste, and Shell that further expand our access to supply.
- Dedicated rail transportation to supplement trucking.
We know from four decades of experience that in times of natural disaster, political unrest, economic uncertainty, and a host of other supply threats, these investments always pay off for our customers.
Whether you specialize in TPEs, EPDM, or natural rubber products; food, pharmaceuticals, or cosmetics manufacturing; agriculture; household products; or another industry that relies on specialty oils, consider partnering with Renkert Oil.
In times of uncertainty, we’ve got you covered.