Fiberglass supply chain struggles amid pandemic and economic recovery
Fig. 1. Overall business activity of fiberglass manufacturers from 2015 to early 2021, based on Gardner Intelligence data.
As the coronavirus pandemic enters its second year and the global economy slowly reopens, the global fiberglass supply chain faces a shortage of some products, caused by shipping delays and a harsh environment. rapidly changing demand. As a result, some fiberglass formats are scarce, affecting the manufacturing of composite parts and structures for the marine, recreational vehicle, and some consumer markets.
As stated in CompositesWorldComposites Manufacturing Index monthly reports from Gardner Intelligence chief economist Michael Guckes, even as production and new orders pick up, supply chain challenges persist across the composites market ( and manufacturing in general) in the New Year.
To learn more about reported shortages in the fiberglass supply chain in particular, CW the editors spoke with Guckes and spoke to several sources throughout the fiberglass supply chain, including representatives from several fiberglass suppliers.
Many distributors and manufacturers, especially in North America, have reported delays in receiving fiberglass products from suppliers, especially for multi-ended bits (gun bits, SMC bits), wire mats cut and woven wicks. Also, the product they receive is likely at a higher cost.
According to Stefan Mohr, global fiber sales manager for Johns Manville (Denver, Colorado, US), this is because a shortage is felt throughout the fiberglass supply chain. “All businesses are restarting globally and we feel that growth in Asia, especially for automotive and infrastructure projects, is exceptionally strong,” he said.
“Right now, very few manufacturers in any industry are getting everything they want from suppliers,” notes Gerry Marino, general manager of sales and marketing at Electric Glass Fiber America (part of the NEG group, Shelby, North Carolina, United States).
Reasons for the shortage would include growing demand in many markets and a supply chain that cannot keep up due to pandemic issues, transport delays and rising costs, and declining costs. Chinese exports.
Fig. 2. Activity of the composite industry related to supplier deliveries and production for the fiberglass market. According to Chief Economist Michael Guckes, the height of the supplier delivery line for early 2021 (shown in green) illustrates the growing proportion of manufacturers experiencing ordering times from slow upstream suppliers.
In North America, thanks to the pandemic restricting group travel and recreation, consumer demand has increased sharply for products like boats and recreational vehicles, as well as for home products like swimming pools. and spas. Many of these products are made with gun bits.
According to Mohr, there has also been an increased demand for fiberglass products in the automotive market, as automakers quickly returned online and sought to restock their inventory following the initial pandemic lockdown in the spring of 2020. The rebound was apparent, as inventory days the car lots for some models hit single-digit numbers, according to data obtained by Guckes.
According to Marino, the 2020 Q3 and Q4 saw “a much greater increase in demand than expected”, particularly for the chopped fiberglass strands used by automotive industry customers and the single-ended bits used. in the wind industry.
“All markets are recovering, some more than others. In general, our industrial customers have recovered faster and to a greater extent than commercial aerospace, but everything is better, ”adds Scott Northrup, vice president of sales and marketing at AGY (Aiken, SC, US). United).
This growth in demand for fiberglass is also strong in China but, according to some sources, no substantial capacity has been added to the production of fiberglass in the past year, which means that the factories are at full capacity with no short-term capacity to increase production, although demand continues to increase. .
Marcio Sandri, president, composites at Owens Corning (Toledo, Ohio, US), adds that increased demand for recreational vehicles and retrofit products has added to the rapid growth of the wind industry. “All of this increased demand came at a time when industry inventories were already low – given planned actions or supply chain issues,” he says.
Supply chain issues
Figure 2 shows Gardner Intelligence supplier delivery and manufacturer production data for the fiberglass market. “Never before have we seen the type of activity spill over between supplier production and delivery activity records,” says Guckes. “After recovering to some extent from the initial shock of COVID-19 in early 2020, conditions deteriorated in the fourth quarter. As a result, serious problems still need to be resolved; deliveries should not be so delayed given the slight rebound in production and new orders over the past six months. “
One factor, reported by vendors, is their ability to get back online quickly. Karin Demez, Product Management Manager for Global Fibers at Johns Manville, said: “We had to adapt to the collapse in demand in the second quarter of 2020 and the decline in glass fiber production on our side. . Then we had to make a 180 degree turn and increase production again.“According to Marino, much of the production capacity of NEG and other suppliers must have been idle for much of the second quarter of 2020.” Last summer began a period of restart when auto factories, followed by other markets, started to restart again, “he said.” The process of restoring capacity has been slow and deliberate. “
In addition, for more than two years, Chinese manufacturers of fiberglass products have reportedly paid and absorbed most, if not all, of the 25% tariffs on exports to the United States. As the Chinese economy recovers, the domestic demand for China’s fiberglass products has increased significantly. This has made the domestic market more valuable to Chinese producers than exporting products to the U.S. In addition, the Chinese yuan has strengthened significantly against the U.S. dollar since May 2020, while fiber manufacturers of glass suffer from inflation in the prices of raw materials, energy, precious metals and transport. The result would be a 20% increase in the US price of certain fiberglass products from Chinese suppliers.
On top of that, there is a serious imbalance in shipping containers around the world, caused by labor shortages caused by a pandemic in major seaports (see Figure 3). As a result, containers are not emptied in a timely manner, which means empty containers are not available for the maritime supply chain. In some cases, the cost of container freight has reportedly more than doubled since June 2020. In the United States, the price of domestic truck transport has also reportedly increased due to lack of capacity and pandemic concerns.
Fig. 3. According to a report by Hillebrand, container shipping rates have increased on all east-to-west sea routes since May 2020, and container freight rates to the east have more than doubled since the start of the COVID-19 epidemic.
Transportation issues, of course, affect all markets, within the fiberglass supply chain and elsewhere. For AGY, which manufactures in the United States and primarily produces fiberglass yarns, rising costs of shipping products to Europe and Asia have been the main issue. “Some shipping lines have been consolidated, rescheduled or reconfigured, and it’s becoming more and more difficult to get the spaces on the ships to move our materials over the water,” says Northrup.
Sandri adds: “It is well known that in the composites industry, prices have not kept pace with inflation for many years. The cost of transportation and precious metals used in fiber production has increased dramatically and there is additional expense to follow pandemic protocols. “
Fig. 4. This chart follows six of the measures of trade activity provided by manufacturers of fiberglass. According to Guckes, figures for February 2021 indicate that backlogs are growing as fast as almost ever, employment is growing, supplier deliveries are very slow, and exports, production and new orders are outpacing most other manufacturing disciplines.
Returning to a more normal supply chain involves many factors, including the global distribution of vaccines. No one knows when more normal operations might resume, but estimates CW Heard suppliers extend from the second half of 2021 to the end of the third quarter and into a year.
Sandri of Owens Corning predicts, “Given the overall inventory shortage in the industry, increasing demand, the time required to expand existing idle capacity, and the time required to bring new capacity online, it is likely that several quarters, maybe even a year, before business returns to normal for the fiberglass reinforcement industry. “
“I don’t know how the transportation issues are going to be resolved, but especially not in the short term, in the next three to six months,” says Iain Montgomery, director of global business development at AGY. “I think in the longer term normal operations will return, but I think by then it will be pretty tight.”
Mohr from Johns Manville adds, “We strongly believe this is only a temporary situation. This is a stress test for the entire organization as well as the entire market, but we continue to do our best to keep our customers operating. “
Fig. 5. According to Guckes, prices observed by manufacturers are increasing, but are well below the actual costs of fiberglass materials. In many cases, he says, this is because smaller manufacturers prefer to absorb rising material costs rather than pass them on to their customers.