If you regularly purchase foam products or haven’t in a while and see what things cost today, you have probably experienced some sticker shock. Well, shock may be an understatement. And, no, it’s not because Hibco or anyone else is trying to gouge you.
The Foam Plastics industry is facing an unprecedented “perfect storm” of growing demand for raw materials that go into producing foam, shortages of those raw materials, increased demand for truck drivers, and rising fuel prices. These are all contributing factors leading to higher prices, limited supply of finished foam products, and longer lead times.
What’s Driving Demand?
Globally, the demand for foam products is being driven by several factors, including new commercial construction, a growing need for product packaging, and increased demand for home furnishings, among other things.
The low supply/increased demand differential always has a direct impact on prices.
Raw Material Shortages
When you couple a growing demand for foam products with a global shortage of the raw materials that go into them, the eye of the storm continues to grow. The prices for some foam ingredients, like PVC, have risen more than 20 percent in the last month alone.
The cost of transporting raw materials and finished products is also increasing at incredible rates due to truck driver shortages and rising fuel costs. The trends of rising freight costs and longer lead times for trucks are likely to continue as the trucking industry faces familiar obstacles – plenty of material to be moved and a shortage of drivers to move it. And that driver shortage will continue to deteriorate as 1,000,000+ drivers are projected to retire or leave the truck driving workforce by 2024, and there just aren’t enough young people looking to trucking as a viable career. As a result, trucking transportation rates are on the rise and could double by the end of the year.
When Will The Storm Pass?
We wish we had a magical “Hibco Storm Radar” we could look at and tell when things are going to stabilize and get better. But like with any storm, it can be a bit of a challenge to predict much of anything at this point, and you may evaluate the damage until the storm passes. In the meantime, hold on as tight as you can.
We are encouraging our clients to plan ahead as much as possible. If you are accustomed to short lead times or just-in-time deliveries, you will have to extend them. As for pricing, we are encouraging everyone to evaluate and reevaluate expenses and their own external pricing constantly.