511 - Market Update Q2 2022

Product-to-Market Pathway

Q2 2022 Market Update

SUMMARY: The new war in Ukraine and resulting boycotts of Russian oil are anticipated to contribute new inflationary pressures on the cost of raw materials, energy consumed to manufacture products, and shipping expense for manufacturers, importers and consumers.

Risk Scale

Low

Moderate

High

Factory-to-Port Outbound Logistics

Ocean Transport Inbound to North America

DC-to-Customer Outbound Logistics

Raw Materials

Manufacturing

Record demand for manufactured goods depleted Chinese coal supplies in 2021 and may lead to continued power shortages in China throughout 2022, impacting production.. Excess 3.5-gram exam nitrile and high-cost older nitrile in the market is leading to widespread inventory liquidation, expected to trend the other direction once inventories are depleted. Industry watchers are reporting slight decreases in Vinyl glove factory output.

Consumer goods demand remains exceptionally high and ocean freight experts predict continued record costs to ship due to constrained vessel capacity as well as delivery delays well into 2023. 60% more vessels are anticipated on routes from Asia to North American East Coast by mid- 2022 as shippers divert product from jammed ports along the West Coast.

Container shortages continue to hamper supply chain efficiency, most acutely in Asia, where container turnaround times are longer due to on-going and severe port congestion. Covid outbreaks are primarily disrupting ground shipping and warehouse operations in China as lock downs in Shanghai at the end of March and earlier outbreaks there, in Hong Kong and other locations demonstrate. Factories and ports have stayed open, but trucking is restricted by government order.

Congestion at inland depots and rail-truck hubs is diminishing supply chain efficiency, greatly slowing the pace of product delivery, resulting in wide-spread extensions of lead-time estimates 511oss all industries. Russian invasion disruption of oil markets caused diesel fuel spikes that may result in ground freight surcharges. Glimmers of progress are seen in alleviating North American port congestion, but ground freight service is still hampered by driver and equipment shortages and long lines of ships dot both coastlines awaiting docking.

Aluminum prices have climbed significantly during Q1 2022, up 32% from January to March on US indexes, 18% in China. Nitrile rubber cost began rising in March. Demand that shifted to Vinyl from scarce Nitrile in ‘20 and ’22 has not shifted back. Russia’s invasion of Ukraine and resulting instability in oil and gas markets is driving up manufacturing costs for resin-based and petroleum-reliant products.

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