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Auto industry hampered again by rubber supply shortages

Production within the automotive industry continues to be stifled, as rubber stock shortages add to semiconductor chip supply issues that could see delays balloon out to years.

While the car industry has had its eyes on the aforementioned semiconductor shortages which have plagued auto manufacturing since the start of 2021, market analysts are now predicting that the next material to become hot property will be rubber.

The tradition of a just-in-time supply system has caught out auto makers and rubber componentry manufacturers alike – both are unable to keep up with 2021’s demand after COVID-induced lockdowns created a dwindling supply situation throughout 2020.

Despite years of relatively stable availability and low prices, latex harvesters have been left in a difficult position after last year. Overharvesting of existing crops and a reluctance to plant new rubber trees has created a perfect storm that has resulted in shortages that could potentially push prices to AU$6.50 a kilogram and last for years, according to business news outlet Bloomberg.

Chinese authorities saw the writing on the wall through 2020 and began to build its national stockpile in order to weather the supply shortages, further causing issues for other manufacturers which rely on just-in-time practices.

Asian countries such as Thailand, Vietnam and Indonesia are large rubber exporters and are less fazed about the shortages, though some United States suppliers are already worried about the looming rubber issues.

“I’ve got everybody alerted that I’ll take materials as fast as they can get it to me,” Gary Busch, director of global procurement at Carlstar Group, which makes tires for off-road and agriculture vehicles, told Bloomberg.

Automotive rubber applications rely on natural rubber (latex) derived from the sap of trees from the warm climes of countries such as Vietnam and Thailand. Part of the issue is that this natural rubber also goes into products like gloves and packaging tapes – which have been in high demand throughout the last year as the public tries to protect itself from the coronavirus.Even though the United States and Europe use substantially less rubber than Asian countries, they also don’t have the national stockpiles to draw upon in times of reduced supply which is what the market is predicting for the near future.

American manufacturers including Stellantis, Ford and General Motors told Bloomberg they're aware of the shortages and are monitoring the situation, though they say they aren't affected as yet.

Whether a perceived – or real – stock shortage is enough to get auto makers or governments to change tacks to build a stockpile remains to be seen and likely depends on how bad this issue gets.

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