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  • Will There Be a Rubber Shortage?

    Let’s get this out in the open right up front: Currently, there is no reported rubber shortage in the United States. In fact, representatives for big tire manufacturers like Goodyear and Bridgestone have made several media appearances to reassure the public that production is up and running as scheduled. 

    At Custom Rubber Corp., we can also report that at the time of writing we have yet to experience any serious supply chain disruptions. However, despite current smooth sailing, some economists and industry experts are anticipating a potential rubber shortage on the horizon. 

    Looking at the facts, the pieces are all in place for a scarcity in the near future, say 2021 or 2022. But will there be a rubber shortage anytime soon?
     

    Where does rubber come from?


    Rubber is a critical raw material in the U.S. In March 2021 alone, the U.S. imported $140 million in raw natural rubber to create airplane tires, car tires, shoe soles, rubber bands and PPE like gloves and masks.
     

    To understand why some people believe there will be a rubber shortage, it’s important to know where rubber comes from. There are two types of rubber commonly used for consumer goods: natural and synthetic. 

    Natural rubber comes from rubber trees, which are tapped in order to collect the milky sap they naturally produce, which is known as latex. This latex is mixed with ammonia to keep it from solidifying, then with acid to prompt coagulation. The mixture is rolled to remove water, then hung to dry before being put in bales to ship further down the supply chain.

    An overwhelming majority of the world’s natural rubber supply, about 90%, comes from the warm climates of Southeast Asia, specifically Thailand. Rubber is usually produced by small family farms who own a few acres of land for growing and tapping. 
     

    Will there be a rubber shortage in 2021 or 2022?


    Like any industry, rubber products are directly impacted by a number of elements, many of which are out of producers’ and suppliers’ control. At present, experts are pointing to several key factors that could point to a shortage sooner than later. 
     

    Cyclical pricing disruptions


    This is the biggest reason cited as proof of any sort of looming shortage. Rubber prices are cyclical, meaning they go up and down in response to different factors in the market. When prices are high, there is incentive to plant rubber trees. When prices are low, there is little incentive to plant and invest in a family farm. 
     
    However, it takes 4-7 years for a rubber tree to mature before it can be tapped for latex. Planting thousands of trees on a family farm 4-7 years in advance requires forethought and planning. Sometimes it turns out not enough trees were planted 4-7 years ago and rubber ends up in short supply, causing prices to rise and more farmers to spring into action and start planting. This in turn means we will see a higher supply in 4-7 years, causing prices to decrease and providing little incentive to plant. 

    See what we mean? This pricing cycle is why some industry experts believe any upcoming shortage is no reason to panic, and that the market will right itself in the subsequent months or years. There are also some arguments that the media has been closely following shortages like toilet paper and semiconductors throughout the COVID-19 pandemic, and that a rubber shortage has simply been overhyped. 

    That being said, there is still unease that other factors, like the ones mentioned below, could exacerbate any upcoming dip in the market, causing a more severe shortage than usually expected in a regular pricing cycle.
     

    Impact of climate change


    Extreme weather events in Southeast Asia have increased over the past decade as a result of climate change. Specifically, tsunamis and typhoons have led to major flooding that washed out many crops. 
     

    Disease


    Rubber tree seeds are all clones of each other, meaning there’s little genetic diversity in any localized population. These trees also stand only 6-8 feet apart on farms. Both of these factors make them very susceptible to disease like leaf blight fungus. Disease can wipe out an entire crop, requiring farmers to plant new trees that take another 4-7 years before they’re ready to tap.
     

    COVID-19 supply chain disruptions


    COVID-19 has caused its fair share of issues within the rubber supply chain. For example,  many OEMs that work with rubber have shut down temporarily throughout the pandemic due to COVID-19 outbreaks and are still bouncing back, though relatively quickly. 

    Additionally, with so many people at home because of the COVID-19 pandemic, the shipment of consumer goods has increased. Between the bottleneck in the Suez Canal, a worldwide surge in demand (especially from China) and a lack of usable shipping containers, the supply chain has been scrambled. 

    Finally, recall that most natural rubber comes from Thailand, which is 15,000 miles away from America. Many businesses are working to find alternative shipping methods, like air travel or alternate sea routes, but it’s difficult to make agile adjustments in a long-established supply chain that requires moving goods far distances.

    As you can see, there is definitely logical reasoning behind the fear of an impending natural rubber shortage. A slew of COVID-19-related disruptions along with regular cyclical pricing and naturally occurring phenomena may explain why some industry experts are worried.
     

    What will a rubber shortage look like?


    The biggest impact of a rubber shortage is increased pricing. If rubber is in short supply, manufacturers will pay more to get it. In turn, they will increase the price of their consumer goods to cover the cost of rubber. The question is just how much we can expect prices to increase, which we won’t know until we actually experience a short supply.

    One key thing Americans need to understand is that for the health of the rubber industry, prices may need to go up, and potentially stay up. For decades, rubber has been an extremely affordable raw material primarily because of the low cost of labor needed to grow and tap trees. 

    Most tappers work on $2-$6 per day, which is not enough to earn a living wage. To ensure growerers and tappers can make a living and support their families, a permanent price increase may not be as devastating as we assume.
     

    How can we prevent a rubber shortage?


    The good news is a rubber shortage does not mean the end of civilization as we know it. For one, many businesses and government organizations are remaining proactive and vigilant about potential issues within the rubber supply chain. 
     

    Some businesses are working to create sustainable solutions by growing rubber in the U.S. from dandelions, which naturally produce latex. These dandelions can be grown, tapped, cut down and regrown several times over. And they don’t need to be grown in the same warm Southeast Asian climates as rubber trees. 

    While early results are promising, this industry has a long way to go before becoming truly sustainable. For the U.S. to be a world player in rubber, it needs more investment in growing and processing plants. (Just one processing plant would be $40 million up front!) 

    The Biden administration is also working behind the scenes to explore supply chain security since rubber prices hit a four-year high in February 2021. American manufacturers depend on rubber for their survival, and it’s in the government’s best interest to avoid economic disruption. But until these entities step up their game, we can sensibly anticipate some form of rubber shortage (or at least increased pricing) in the near future.
     

    Rubber Shortage FAQ


    While the future is uncertain, there are some things we know for sure about any impending shortages. Here are the answers to some more commonly asked questions.
     

    Will a certain type of rubber be more affected?


    Only natural rubber will be affected by a shortage. Synthetic rubber, which is used to create consumer goods like laptop sleeves, hoses and even radiators, will not be affected. Synthetic rubber is oil-based and does not depend on rubber trees. 
     

    Will certain types of products be more affected?


    Only products using natural rubber will be impacted. Car and aircraft tires are the biggest industries depending on rubber, but natural rubber is also used to make common household goods like pacifiers, clothes and toys that may be affected.
     

    Is this a global problem?


    Yes. Rubber is only grown in one region (Southeast Asia), but is used worldwide. Every country that purchases natural rubber will be affected by rubber scarcity. The world’s largest consumer of rubber, China, may have the most to lose from a potential shortage. 
     

    How long can we expect price increases to last?


    When the cost of a certain material or product soars, many people wonder if we will ever return to “normal,” AKA the price they’re used to. Technically, the answer is yes as the rubber market is cyclical. In just a few months we may see the rubber supply dip and resurface as prices follow accordingly.

    But again, it’s important to emphasize that for the sake of human rights and the health of the industry, we may want to see rubber prices go up and stay up. Higher prices may be yet another “new normal” brought about by COVID-19.
     

    What can I do about a potential rubber shortage?


    Right now, the best thing you can do to avoid disruption over a potential rubber shortage is to place an even greater significance on prototyping and work with proven companies that maintain a track record of excellence.

    Working with experts early in the design process allows for time to determine the ideal material for your application, in terms of both function and availability.

    We’re proud to report that Custom Rubber Corp. has maintained a track record of excellence for 65 years with a 98% customer retention rate over the last 20+ years. We have extensive experience in the design and molding of custom rubber products for a variety of American and international companies, including small, mid-size and large manufacturers.

    Our aim is to exceed expectations with professional attention and expertise. Get ahead of any upcoming shortage by contacting Custom Rubber Corp. to choose the best, most cost-effective rubber material for your application(s).
    Posted Friday, November 5, 2021 by: Global Administrator
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