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Raw materials shortage puts SA coatings industry under pressure
A
serious shortage of raw materials , coupled with substantial increases in prices for raw materials , has put the South African coatings industry under immense pressure , says Tara Benn , executive director of the SA Paint Manufacturing Association ( SAPMA ).
Benn says a complex mix of demand , production issues at global chemical plants , and scarce transport resources for key raw materials are hitting the supply chain with resultant enormous implications for an industry already badly hit by pandemic lockdowns last year .
• The closure of several plants in Europe during lockdowns led to raw materials suppliers invoking ‘ force majeure ’ to contractually break supply obligations .
• Soaring transportation costs due to the sharp rise in oil prices and shortage of containers . “ The pandemic lowered commodity demand and therefore the traffic and volume of containers moving geographically between regions decreased . As demand picked up again , sea freight costs skyrocketed . SAPMA estimates that on average , sea freight costs have gone up by as much as 40 % to 55 %.”
The main reasons for the coatings raw materials shortage and price rises in South Africa are :
• An increase in demand for paint and raw materials from neighbouring SADC markets which lost a significant supply of imported material from China , India , and the Middle East due to Covid-19 shipping restrictions . “ Companies in the SADC then turned to SA to provide alternative supplies which , although providing welcome new business , nevertheless drained local supplies ,” Benn explains .
• Heavy snowstorms and sub-zero temperatures in the US forced several key US raw material suppliers to halt production .
Benn says according to the European Paint Council , CEPE , the shortage of raw materials is an “ immense burden ” for the coatings sector worldwide as raw material prices account for more than half of the cost of finished products . Since January last year , costs for key components such as epoxy resins have risen by 60 % in Europe , while among solvents , prices have soared by up to 123 %, CEPE has estimated .
“ The current situation is exacerbated by the unexpectedly rapid economic recovery in China , which is also fuelling demand for key raw materials ,” Benn added .
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