In an economy upended by the coronavirus, shortages and price spikes have hit everything from lumber to computer chips. Not even toilet paper escaped.
Now, they’re cutting into one of the humblest yet most vital links in the global manufacturing supply chain: The plastic pellets that go into a vast universe of products ranging from cereal bags to medical devices, automotive interiors to bicycle helmets.
Like other manufacturers, petrochemical companies have been shaken by the pandemic and by how consumers and businesses responded to it. Yet petrochemicals, which are made from oil, have also run into problems all their own, one after another: A freak winter freeze in Texas. A lightning strike in Louisiana. Hurricanes along the Gulf Coast.
All have conspired to disrupt production and raise prices.
“There isn’t one thing wrong,” said Jeremy Pafford, managing editor for the Americas at Independent Commodity Intelligence Services (ICIS), which analyzes energy and chemical markets. “It’s kind of whack-a-mole – something goes wrong, it gets sorted out, then something else happens. And it’s been that way since the pandemic began.’’
The price of polyvinyl chloride or PVC, used for pipes, medical devices, credit cards, vinyl records and more, has rocketed 70%. The price of epoxy resins, used for coatings, adhesives and paints, has soared 170%. Ethylene – arguably the world’s most important chemical, used in everything from food packaging to antifreeze to polyester – has surged 43%, according to ICIS figures.
The root of the problem has become a familiar one in the 18 months since the pandemic ignited a brief but brutal recession: As the economy sank into near-paralysis, petrochemical producers, like manufacturers of all types, slashed production. So they were caught flat-footed when the unexpected happened: The economy swiftly bounced back, and consumers, flush with cash from government relief aid and stockpiles of savings, resumed spending with astonishing speed and vigor.
Suddenly, companies were scrambling to acquire raw materials and parts to meet surging orders. Panic buying worsened the shortages as companies rushed to stock up while they could.
“It’s such a bizarre scenario,” said Hassan Ahmed, a chemicals analyst with Alembic Global Advisors, a research firm. “Inventories are lean, and supply is low. Demand will exceed supply growth.”
Against the backdrop of tight supplies and surging demand came a series of events that struck Pafford as Murphy’s Law in action: Anything that could go wrong did. In 2020, Hurricanes Laura and Zeta pounded Louisiana, a hub of petrochemical production.
Then, in February, a winter storm hit Texas, with its many oil refining and chemical manufacturing facilities. Millions of households and businesses, including the chemical plants, lost power and heat. Pipes froze. More than 100 people died.
A July lightning strike temporarily shut down a plant in Lake Charles, Louisiana, that makes polypropylene, used in consumer packaging and auto manufacturing.
The industry was just beginning to recover when Hurricane Ida struck the Gulf Coast in August, once again damaging refineries and chemical plants. As if that weren’t enough, Tropical Storm Nicholas caused flooding.
“Some of these downstream petrochemical plants in the Gulf Coast regions are still shut down from Hurricane Ida,” said Bridgette Budhlall a professor of plastics engineering at the University of Massachusetts-Lowell.
“Anything related to base chemicals – they’ve had a hell of a year,” said Tom Derry, CEO of the Institute for Supply Management, an association of purchasing managers.
“It’s been the hardest year for logistics and supply chain managers,’’ Pafford said. “They always say the most stressful job in the world is being an air traffic controller at any airport ... I’d venture to say that being a supply chain manager is that – or worse – this year.’’
Ford Motor Co., hampered by an industrywide shortage of computer chips, is now running short of other parts, too, some of them based on petrochemicals.
“I think we should expect, as business leaders, to continue to have supply chain challenges for the foreseeable future,” CEO Jim Farley said in an interview with The Associated Press.
The shortages are slowing production at two leading paint makers, Sherwin-Williams and PPG. Both have raised prices and downgraded their sales guidance, saying the outlook for additional supply remains dim.
Though Sherwin-Williams reported strong second-quarter profits, it said that a lack of raw materials cut sales by 3.5% for the period. CEO John Morikis said Sherwin-Williams raised prices in the Americas by 7% in August and an additional 4% this month. More increases are possible next year, he said.
The chemical shortages, combined with a near-doubling of oil prices in the past year to $75 a barrel of U.S. benchmark crude, mean higher prices for many goods.
“The consumer is going to have to pay,” said Bill Selesky, a chemicals analyst for Argus Research, who suggested that many households, armed with cash from government aid and built-up savings, will be willing to pay higher prices.
In the meantime, the supply problem isn’t getting any better. A W.S. Jenks & Son hardware store in Washington, D.C., is receiving only 20% to 30% of the paint it needs to meet customer demand without backordering. In normal times, that rate usually runs 90%, says Billy Wommack, the purchasing director.
“Nobody’s happy about it,” Wommack said. “There are a lot of ‘I’m sorrys’ out there.”
The shortage is generally felt most by big contractors that need, say, the same-colored paint for numerous apartment complexes and other major projects. Individual homeowners can typically be more flexible.
Duval Paint & Decorating, with three stores in the Jacksonville, Florida, area, is scrambling to fill orders, especially for big contractors who need a lot of paint, said John Cornell, a sales clerk who orders paint for the stores.
“We’re struggling,” Cornell said. “Sometimes you have to grab products and sit on them for weeks or months so that when the job starts we have it.”
Andrew Moore, a clerk at Ricciardi Brothers in Philadelphia, said the store has been running short of lower-grade paints that large contractors use, though here’s ample supply of higher grades. Demand is so high that the store is having a record year, with sales up 20% over last year. Prices are up as high as 15% for some brands, Moore said.
The problems in the petrochemical supply chain have been compounded by shortages of labor and shipping containers and by overwhelmed ports. Some Asian ports have been shut down by COVID-19 outbreaks. In the United States, ports like the one in Long Beach, California, are struggling with backlogs of ships waiting to be unloaded.
“I think this is going to go on for a really long time because there are so many factors at play here,” said Kaitlin Wowak, a management professor at the University of Notre Dame. “And it’s across the board in so many products.”
It’s also forcing manufacturers to rethink some of their practices. For decades, companies moved production to China to capitalize on lower labor costs. They also held down expenses by keeping inventories to a minimum. Using a “just-in-time’’ strategy, they bought materials only as needed to fill orders. But as the recession and recovery showed, keeping inventories threadbare carries risk.
“Supply chains have changed forever,” said Bindiya Vakil, CEO of the supply chain consultancy Resilinc.
The old management philosophy, she said, was to “get everything to the lowest possible price point... What we are dealing with right now is a consequence of those decisions. Companies have lost hundreds of millions, in some cases billions, of dollars in (forgone) profits because of that, because their supply chains failed.’’
The petrochemical experience, Vakil said, will teach companies to monitor the lowliest links in their supply chains. It’s always easier, she said, to track only the big-ticket items – engines, say, or electronics.
But simple plastics are vital, too. Imagine trying to market breakfast cereal without a cheap plastic bag to hold corn flakes or wheat bran.
“You can’t just dump the cereal into the cardboard and ship it,’’ Vakil says. “The plastic bag is just as critical an ingredient as the actual (product) and the cardboard and everything else. But supply chain practitioners traditionally have not considered it to be just as critical. And nowadays plastics are ubiquitous.”
Analysts expect the petrochemical crunch to last well into 2022.
“You really have to put COVID truly in the rearview mirror for this logistics situation to normalize,’’ Pafford said. “You can’t simply just throw more ships and more containers on the water. ...We’ve got to get them loaded. If ports are going to be shut down because of a COVID lockdown – good luck.’’
Wiseman reported from Washington, Krisher from Detroit.
Across the country, school cafeterias are facing food supply issues.
A number of school districts in Southwestern Pennsylvania, too, are having to make menu changes in their cafeterias, as supply chain issues and other problems are impacting food service operations.
“It has been a challenge,” said Chuck Brown, director of food service for Uniontown Area School District. “Everybody’s rising to the occasion. What we can’t get from primary vendors, we’re scrambling to find secondary sources and other vendors.”
Brown noted food vendors nationwide are experiencing production and supply delays, and labor and driver shortages that are making it increasingly difficult – and more expensive – for vendors to produce and transport food.
In a Sept. 23 letter sent to its school district clients throughout the region, The Nutrition Group notified administrators that items such as chicken, bread and buns, cereal and other breakfast foods are either unavailable or difficult to get.
“One of the hardest (products) to get right now is chicken,” said Brown. “Potatoes, too. It’s hard to get a french fry, a Tater Tot, or any potato product.”
Brown said that although students might not be getting what’s on the menu – chicken nuggets might be substituted for pizza, for example – they still have two or three options for healthy meals.
The Nutrition Group said its concern at the start of the school year over potential supply chain issues that might impact food service operations “has quickly become a reality, and this week it seemed each day we received more unfortunate news about products we will no longer be able to purchase for the foreseeable future.”
Connellsville Area School District Superintendent Dr. Joe Bradley said the district is currently experiencing shortages in paper products and Sytrofoam products.
“It hasn’t impacted delivery of meals to students yet,” said Bradley. “We’re constantly looking and evaluating whether the supply chain issues will affect us, as far as food and food storage. Right now it hasn’t impacted us food-wise, but we may have to look for other sources.”
In a letter posted to parents on its website, Charleroi Area School District wrote, “Since the onset of the pandemic, we’ve all experienced shortages in the grocery stores and restaurants we visit. School food service is not immune to those same challenges. Occasionally you’ll notice changes to school menu options, or your child may tell you that a favorite menu item has been missing. We want to reassure you that your child will still be able to enjoy a nutritious, balanced quality meal daily.”
Shelly Belcher, communications coordinator at Peters Township School District, said the school district has experienced a few issues with food supply, and notified parents in an email last week that a menu item was changed due to unavailability.
“But we have been told by our food service department to expect more of that, so we have alerted our parents that that could be coming,” said Belcher. Our team is trying to be proactive in ordering early and trying to have a nice supply on hand, but seeing what’s going on in other communities – and just in terms of supply chains around the country – we’re anticipating more of this.”
Trinity Area School District Superintendent Dr. Michael Lucas said the district’s food service department has managed to pivot its food supply process and find alternative resources and delivery options amid the supply and driver shortage.
“For some students, this is the only quality meal they receive,” said Lucas.
Brown said the district’s main vendor, U.S. Foods, was unable to distribute food last week to the district’s schools, but resumed delivery this week.
Brown said the school district carries enough food in its inventory to last 10 to 14 days.
“In a nutshell, we are still providing choices that meet the regulations for reimbursable lunch and breakfast while we try to maintain our budget and meet our goals for the national lunch program,” said Brown. “My advice is please be patient, be flexible, and we are always here to answer any questions parents might have.”
The sheriff’s office is reevaluating how deputies check visitors entering the Washington County Courthouse after three apparent security breaches in a little more than two months this summer.
A meeting was held in early September between Sheriff Samuel Romano and President Judge John DiSalle to discuss courthouse security shortly after a man was able to bring a folding knife into the booking center inside the Family Court Center annex during a weekend check.
“As in law enforcement, we’re always trying to tweak and train and do better,” Romano said Wednesday. “We’re always going to reevaluate and do things as efficiently as possible. If there’s a better way to do it, we’ll do it.”
Richard Keeney, 59, of Canton Township, had a knife connected to his waistband when he allegedly brought it through security Sept. 4. The metal detector alerted the on-duty deputy, who then used a handheld wand to scan Keeney, according to court documents. Keeney told the deputy that he had knee replacement surgery, and then he was allowed to proceed after being checked.
Keeney later told a worker in the booking center he had the two-inch folding knife in his waistband hidden underneath his shirt, which he forget about during security, according to court documents. Deputies confiscated the knife and returned it to him when he left. He was charged with possession of a dangerous weapon in a courthouse facility, which was docketed at District Judge Robert Redlinger’s office Tuesday afternoon.
That incident earlier this month followed two other security situations over the summer.
Reed Marshall Morrow was accused June 28 of bringing three bags through security and later telling an attorney one of them had a bomb detonator inside, prompting the evacuation of the courthouse. No explosives were found in Morrow’s bag, but he was charged with terroristic threats causing the evacuation of a building.
On Aug. 20, Register of Wills James Roman was accused of bringing a handgun in his bag through security and was charged with possession of a firearm in a courthouse facility. Roman posted on his office’s Facebook page Aug. 25 a day after the charge was filed that he “forgot it was in my bag” and that the deputies initially “didn’t notice” before they spoke to him about the firearm and told him to return it to his vehicle. Court documents indicated a deputy noticed the handgun in the X-ray scan following a shift change during lunch.
There have been noticeable changes over the past two weeks at the security checkpoint at the only public entrance to the building on West Cherry Avenue, with visitors now required to place bags and all other personal belongings in large trays that are fed through the X-ray machine. Previously, only bags were scanned, while pocket items such as keys, wallets and cellphones were placed in a clear plastic bin and inspected by deputies. Visitors still must walk through a metal detector.
A memo from Romano dated Sept. 16 explaining the new procedure is posted on a table as visitors enter security.
Specific details about what Romano and DiSalle discussed at their meeting earlier this month were not released, although Chief Deputy Tony Andronas said that it centered around security. DiSalle could not be reached for comment Wednesday to elaborate on what was discussed with the sheriff and other court officials.
Andronas said Wednesday that they’ve made adjustments to security, including purchasing the larger trays so personal items can go through the X-ray machine along with bags. He said the sheriff’s office also underwent “remedial” training with federal authorities in July, although he said it was a “refresher course” and not the result of the bomb threat incident in late June.
The number of people coming through security in recent months has increased as courthouse functions and legal proceedings have expanded after being mostly dormant in 2020 at the height the COVID-19 pandemic. In addition, sheriff’s deputies are also in charge of enforcing DiSalle’s order on Aug. 4 requiring everyone in the courthouse to wear face masks in most situations.
“There’s no doubt there were a lot of cases that were continued to this year,” Andronas said of the increase in visitors. “We definitely have more patrons coming through with the (lifting) of the COVID concerns.”
The West Cherry Avenue entrance between the main courthouse and Family Court Center annex is the only public entryway to the building after the South Main Street doors were closed last year. It was not known when the main entrance to the courthouse will reopen to the public.
“That side entrance is a busy entrance,” Andronas said. “Between last year and this year, it’s been busy.”