ADHESIVETRENDS
An e-newsletter from ITW TACC
January 2005
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ADHESIVE |
What goes into making an adhesive is as important as what it's being used for. ADHESIVE MATERIALS provides updates on current materials and production issues. |
The Effects of Supply and Demand Imbalance For the 15 years preceding 2003, global supply and demand for commodity chemicals was in an equilibrium state. Slow growth rates and slim profit margins caused chemical manufacturers to limit their investment in building new plants and significant upgrading of existing facilities. Since 2003, demand has grown at greater than 5% per annum while supply has grown at only 3.7%. This has created shortages of many commodity chemicals. With no new manufacturing capacity coming on line, manufacturers are allocating chemical feedstocks and/or processed products. With demand for chemical products surging beyond current capacity, suppliers now have to consider what products they produce are going to create the best return for their money. Suppliers are using this “alternate value” as a justification for this positioning of their raw material and production resources. This results in a supply/demand imbalance that has forced up prices of feedstocks and limited or eliminated the production of low margin products. Chemical manufacturers have also invoked Force Majeure (literally “greater force”). Force Majeure excuses manufacturers from liability of non-performance of contractual obligations because of forces or events beyond their control. A number of suppliers have invoked Force Majeure over the last several months due to equipment failures and extended maintenance repairs caused by full-capacity output at older manufacturing facilities, or feedstock shortages of raw materials. Allocation is similar to, or one step removed from, force majeure. With allocation there is material available, but based on the particular situation (feedstock shortage, equipment failure, etc.) the available material may not be sufficient to cover all of the demand the manufacturer has. Allocation is typically based on last 12 months of purchases, the last 3 months of purchases, or could be a percentage of either scenario. The adhesive industry is experiencing such allocations on a number of raw materials. ITW TACC has minimized the full impact on our mutual business through purchasing additional stock, using alternative sources, and leveraging our vendor relationships to continue an uninterrupted flow of goods to our distributors and customers. We are anticipating that as industrial demand continues to increases that additional actions may by taken by suppliers. We will continue to keep you updated. |
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ADHESIVE |
Our customers face a myriad of business and production challenges. ADHESIVE SOLUTIONS aims to keep you informed of the solutions ITW TACC provides. |
RETURNING RE-USABLE CANISTERS
Over the last year, ITW TACC has seen a significant decrease in the number of canisters returned. This reduction in canister returns has affected our on-time shipments to our distributors. ITW TACC has undertaken a number of measures to ensure the prompt return of our canisters from our customers and distributors. We have also streamlined the return process in that only one call to ITW TACC Customer Service Department will ensure pick-up. Stickers on each canister indicate to return it to the distributor from whom it was purchased. Stickers are also being placed on the box of each smaller returnable canister. Our Customer Service Team is calling our distributors on regular basis, and will continue to call, to see to it that canisters are returned promptly.
ITW TACC is investing hundreds of thousands of dollars in new canister inventory in the 1st quarter of 2005 in order to improve service levels and anticipate expected growth. ITW TACC is not passing these costs on to our customers and distributors. Prompt return of canisters will keep future costs down and ensure uninterrupted delivery cycle
