In the past year, the wire and cable industry has faced its share of challenges and now manufacturers are having a difficult time receiving raw materials required for the production of wire and cable. While precious metal prices surged six months ago, a supply shortage of resins began to appear and has now set production times of manufacturers back up to 8 months.
Due to the majority of Americans being forced to lockdown in their homes, government-mandated shut-downs of “non-essential” business, and the unemployment woes brought by both, consumer spending dropped to an all-time low. In the wire and cable market, the demand for products and distribution was minimized dramatically, while the prices of certain materials began to skyrocket. The price of polyvinyl chloride (PVC), a material used for cable insulation, increased by 70% of the original market price. For epoxy resin, a material used for adhesives and paints, costs rose to a dramatic 170% of the original market price. The root of the problem is quite clear; in the wake of the global pandemic, businesses became paralyzed and were forced to significantly slash production. Worldwide, manufacturers and distributors were unable to send out shipments of materials, forcing many company operations to come to a screeching halt.
Through the weeks that followed, many consumers racked up big bucks through their granted government relief. Due to this, consumer spending went from 0 to 100 virtually overnight, causing many businesses to scramble for supplies due to the rapid surge in demand. The demand continued to increase, but operations were moving very slowly - many manufacturers lacked the resources that were required for smooth operations, and a massive amount of previous employees refused to return to work due to steady government aid coming in. The issues that have arisen in the petrochemical supply chain have been caused due to shortages of labor, shipping containers, and overwhelmed ports. Unfortunately, consumers became impatient quickly, and manufacturers simply were not able to keep up.
The numerous natural disasters that occurred in the last year are a large factor as to what ignited the chemical shortage. Hurricanes Laura and Zeta tore through Louisiana and destroyed everything in their paths, including the majority of the petrochemical production plants and causing both production and shipments to come to a complete stop. The Texas winter freeze turned the entire state upside down, causing electricity to be shut off, pipes to freeze, and entire oil refineries and chemical plants to stop production completely. Hurricane Ida, the most recent hurricane, is attributed to the potentially unrepairable damage of refineries and chemical plants along the entire gulf coast.
COVID-19 changed the way wire and cable manufacturing and its supply chains operate forever. Due to the pandemic, many companies have been forced to rethink their business practices to prepare for an uncertain future. Unfortunately, it will take time for many industries to play “catch up”, as no one was truly prepared for the devastating hit that COVID-19 and governmental actions had presented them with. In the wire and cable realm, petrochemicals and resins are a vital resource that allows products to be made correctly, and operations to run smoothly. While this shortage may last longer than anticipated, it will allow the industry to reform its business practices for a more extensive array of events that may occur in the future.