Pigment Shortages Challenge Color and Compounding

April 4, 2022 • Posted in Market Insights

In recent weeks, the war in Europe has added extra pressure to an already-stressed global supply chain, causing a near-total embargo of one of the world’s busiest routes for cross-border commerce and further aggravating how goods move around the world. While many industries are turning to domestic vendors to fill the gaps and reduce delays in available supply, the color and compounding industry has been hampered by its reliance on Eastern countries like India and China to supply the necessary components for product processing. This logistical challenge has contributed to pigment and additive shortages that may test the market for months and years to come.

Long-Term Production Disruption

Shortages of pigments, additives, glass and some specialty resins are causing far-reaching service interruptions and hampering industry growth. The specific engineered formulas at the core of the color and compounding market make it especially vulnerable to individual component shortages. Ingredient substitution is often prohibited by customers without testing and requalification, further complicating the challenge for compounders. The breadth of the current material shortage situation is playing havoc with production scheduling and disrupting the downstream value chain.

Besides material shortages, supply chain disruptions are stranding materials in transit, particularly for imported products. Delivery lead times that normally take weeks can now take months, with specific delivery dates uncertain. Compounders are facing estimated import delays of up to 20 weeks and beyond with no guarantee that the component will arrive within that time. What’s more, demand is strong, and inventories depleted through the pandemic remain tight, causing many products to be oversold without new supply on the horizon. When scarce materials do arrive, processors often must ration them to the most pressing needs. Many businesses are passing on new opportunities to compensate, focusing instead on filling more predictable existing orders where components are already in stock. Businesses will likely continue to be conservative in accepting new orders until the necessary pigments are more reliably available.

Unfortunately, there’s little relief in sight given the continuing pandemic surges and lockdowns in Asia, war-related disruption in Europe, and the ongoing chaos in global supply chains. Additives are a particularly critical problem, with shortages of waxes, flame retardants, polymer modifiers, UV and AO packages, and glass affecting order delivery times. Zinc sulfide, the only product that can be used in glass formulas, is short as well, hampering the production of glass compounds across the plastics industry. Even if COVID-19 subsides and pigment and additive availability returns to normal, supply chain challenges are likely to persist well into 2023 and perhaps beyond.

Collaboration and Planning Are Key

So, what can compounders and their customers do to ease the strain? Peter Prusak, Director of Business Development and Scott Arnold, Market Manager, Color & Compounding at M. Holland, say collaboration is the key. Within businesses, Peter recommends close coordination between formulators and purchasing departments to reduce the impact to their business operations. “Color chemists that work together with logistics departments to review the pigments, performance additives and carrier resins in short supply will have better success supplying converters and OEMs with not only a color match, but a supply of masterbatch over the course of the shortage,” Peter said. “Creating a culture of collaboration now will lessen the likelihood of major problems going forward.”

Externally, Scott stresses the need for increased communications between compounders and their customers to anticipate and get ahead of pending supply shortages. “If you see a challenge ahead, there’s an opportunity to reformulate and qualify alternative ingredients before production lines go down. When developing compounds for new applications, it might be wise to qualify alternative formulations up-front where ingredients are vulnerable to shortages,” said Scott. “The duplicate effort up-front is a small investment compared with the cost of a missed order, line shutdown or angry customer.”

Preparing for Shortages into the Future

In addition to increasing collaboration, overbuying essential components and those subject to shortages helps ensure supply is available when needed, says Scott. “Until the crystal ball clears, extra inventory is cheap insurance against unexpected shortages.”

At M. Holland, we are fully committed to helping our customers source and secure the materials they need to do business. Supply chain issues have plagued the global economy in recent years, but we continue to provide the logistical services and guidance our customers need with a proactive and thoughtful approach to market challenges. To learn more about M. Holland’s Color & Compounding technical services and product offerings, visit our dedicated market page.

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