In all meetings with industrial representatives, the topic is the exponential increase of raw material costs. The coating sector is particularly affected in the solvents area, but also plastics, ferrous materials, wood, basic chemicals, everything increases in a steep way. What’s going on?
There are many explanations, perhaps no certainty.
First of all, commodity price indices show that in the year 2020, the year of the pandemic, there was an accelerated decrease compared to 2019 that had seen only a downward rebalancing from the values of 2017 and 2018. At the end of 2020, with recovery inactivity after the lockdown, all the drivers of commodity prices returned to “push”: China first, but also the United States and to a small part of Europe show full-capacity manufacturing activity. Production costs are back on the run, transport costs have more than doubled for containers and there is no intention to change an expansive monetary policy. It is in the interest of the increasingly indebted States to have some inflation after a period of deflation. In fact, the ECB revises its estimates and indicates a 1.5% by the end of 2021. Consumption is currently lacking, while savings are increasing. It is to be hoped that purchases of the final customer will also start again, otherwise, there is some risk of inflation from costs without real growth.
What about coating products? Wood coatings? In the context described they are particularly disadvantaged. In fact, the phenomena described are added to oligopolistic situations on basic materials, insufficient stocks accumulated in the year of Covid, accidents and weather conditions (see the story of Texas), shortage of many raw materials.
Prices go crazy: we have cases such as MIBK solvent that exceeds 300% increase, butyl acetate, ideal solvent for certain technical solutions, from January the price has doubled, acetone is almost twice than a year ago and isocyanic resins are skyrocketing.
The problem is the inertia of downstream transfer in a market where there has been overproduction for years and where exports, in times of pandemic, are no longer a sufficient outlet.
So hardeners of polyurethane systems, resins that contain phthalic anhydride, styrene, isophthalic acid, methanol derivatives, oils and fatty acids, butyl acrylate derivatives, in addition to the already mentioned solvents, everything grows. How much and how long?
From 15 % to 25%, i.e. tens of cents per unit of sale, kilo or liter, will be the average increase on finished products needed to cover the costs. If the third quarter, as it seems, has been already compromised, then for 2021 that’s it.
All we have to do is to update our prices and hope for “the calm after the storm”.
CEO – Eng. Andrea Moltrasio