N°42 – AUTOMOTIVE. Is Rubber the Industry’s Next Shortage?

25/04/2021

As if automobile manufacturers weren’t facing enough issues with the current semiconductor shortage coming on the heel of a year of Covid-19 related restrictions, a new shortage is already lurking at the horizon: rubber. According to this Bloomberg article, industry observers say rubber prices may be at the beginning of a cyclical, multi-year rally as flooding and leaf disease have devastated supply, while the commodity’s low prices in the recent past gave rubber tappers little motivation to plant new trees, which need seven years to mature. Rubber producing trees can be found in such warm and humid places as Thailand and Indonesia. As a precaution, China, which consumes overs five million tons of rubber each year, or more than the USA, the UK, Europe and India combined, already began stockpiling late last year which might make it all the harder for others to source the precious material in the near future. In this scenario, the pressure felt by the world’s tire manufacturers could have a direct trickle-down effect on automakers which would offer a new solid argument to those who are calling for more resiliency and less just-in-time. And if you think this isn’t enough to keep supply chains managers up at night, consider this: the electrification of automobiles is tied to the availability of cobalt, a scarce and expensive material that is mostly found in the mines of the conflict-stricken Democratic Republic of Congo.
Photo © Britannica
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