NRK Manufacturers under pressure from shortages of raw materials

Just like elsewhere in Europe, Dutch entrepreneurs in the rubber and plastics industry have observed many force majeure statements from raw material suppliers. Committed deliveries are cancelled. If delivery is made, it is at increasingly higher prices. Europe is a net importer for rubber and plastic raw materials, which makes Europe extra vulnerable to market disruptions. The current shortages are caused by the improving global
economy in combination with exports of plastics from Europe to Asia and North America. Logistical problems due to a shortage of containers to Europe also contribute, as does the lower production of plastics in the US. Furthermore, the demand for certain raw materials used for protective articles against COVID-19 is extremely high. On top of that are the many
declarations of force majeure.

Force majeure
The shortages due to force majeure declarations are no longer compensated by intermediate stocks in the market. The declaration of ‘Declare Force Majeure’ implies a situation of force majeure on the part of the raw material supplier. Based on the current claims, it is unclear whether the force majeure requirements are met. The NRK and EuPC
(European Plastics Converters) will continue to monitor developments. We continue to urge government agencies in the Netherlands and Europe to pay attention to the (world) market conditions of a level playing field.

Production problems
The situation is causing serious problems for our manufacturers of rubber and plastic (end) products and their customers. The cost price of their products is largely determined – up to 70% – by the raw materials. The spiral of sharp price increases and serious shortages is a danger for large and smaller companies in the rubber and plastics industry. Costs are always
passed on with a delay, which puts pressure on the margin or even makes production lossmaking. More serious is that, due to a lack of raw materials, manufacturers are sometimes unable to deliver their end products to their customers in end markets such as construction
& infrastructure, packaging industry and automotive and machinery (b2b). This leads to production problems later in the chain, as a recent report from the European furniture industry shows. In view of the shortages, the NRK advises its member companies, where possible and permitted, to proceed to the use of recyclate for the products, in consultation with the customer. Recyclate is increasingly a suitable alternative for the use of virgin plastics.

Strong price increases in January 2021 for raw materials for plastic and rubber products, such as Propylene and PP homo- and copopolymer. Source: Essenscia PolyMatters January 2021.

Source: press release NRK, for more information click here.