From zippers to glass, commodity shortages hamper U.S. economy

FLETCHER, NC, Sept. 13 (Reuters) – For Lauren Rash, it was the little things that got in the way of production at her tent factory here, like the many shades of black Velcro.

His company, Diamond Brand, has just launched a new line of premium wall tents called Liminal, with vents and attachments demanded by discerning campers. But that does mean using a lot of velcro. And that’s a problem, because black Velcro comes in several shades, depending on the type of raw plastic resin used to make it.

“If I have an older stock and put it new,” the colors won’t match, Rash said. “Black is not black is not black.”

Before supply chain disruptions and shortages swept the world in the wake of the COVID pandemic, purchasing spare parts for an assembly line was often as easy as clicking a button and waiting for a few. days or, at most, a few weeks for delivery.

Not anymore.

Shortages of metals, plastics, wood and even bottles of alcohol are now the norm.

The result is a world where buyers have to wait for delivery of items that were once plentiful, if they can get them. Rash has stacks of tents that she can’t ship because she can’t get the right aluminum tube for their frames, for example, while others don’t have the right zippers.

The shortages are accompanied by sharp price increases, which have fueled fears of a sustained wave of inflation.

There is growing tension among Federal Reserve policymakers over how to assess the long-term impact on prices. Some Fed policymakers are more convinced than others that pricing pressures will ease once some of the supply chain disruptions are resolved. How this debate evolves could influence how quickly the Fed is working to reduce the pace of asset purchases launched at the start of the pandemic and how quickly it will raise the policy interest rate from its near current level. zero.

Rash and other local producers recently participated in a broad forum with Richmond Fed Chairman Tom Barkin, who focused on the challenges of the U.S. recovery posed by unsuccessful supply chain issues. not resolved as quickly as policymakers had hoped.

Shortages hit everything from bulldozers to bourbon. Heavy-duty equipment maker Caterpillar Inc (CAT.N) warned in July that its profits would suffer in the current quarter in part because of higher prices for hard-to-obtain components. The company said, among other things, that it was looking for ways to source from non-traditional sources to deal with plastic resin and semiconductor shortages.

Lawson Whiting, managing director of spirits producer Brown-Forman Corp (BFb.N), told investors earlier this month that shortages of “key packaging materials, especially glass” continue to create problems for the maker of brands such as Jack Daniel’s and Woodford. Reserve.

New challenges continue to emerge, including hurricane disruption to U.S. oil refineries, which once again threatens the supply of plastics and other basic materials.

Some industries are rushing to build new factories, including semiconductor producers under pressure to fuel a growing appetite for the chips needed in cars and electronics. But not all producers are eager to build new factories. The bicycle industry, for example, is heavily concentrated in Asia, and producers fear that the current surge in demand is only temporary.

“Asian factories have seen this time and time again,” said Brent Graves, CEO of Cane Creek Cycling Components, another small manufacturer from Fletcher, North Carolina, which relies heavily on Asian suppliers for bicycle parts. “They say, ‘Well, we’re going to work overtime.’ But in terms of gross investment in facilities, overall they’re reluctant to do that. “

Clogged supply lines exacerbate the current problem. With so many manufacturers rushing to make supplies all at once, the containers, ships, and trucks needed to move goods are often not available and have skyrocketed when they are. This has disrupted some of the mechanisms that normally help control supplies and prices.

David Reilly, president of United Solutions, a plastics maker in Leominster, Mass., Said the spike in resin prices – he estimates they have gone up 100% for some types in the past year – is his biggest challenge.

Normally, he would ask his buyers to scour overseas markets, including China, for cheaper resins.

“But we can’t do that,” he said, as shipping prices have gone up so much that they erase any price advantage. “Right now, producers in North America don’t have the fierce competition they would have if container prices fell. “

Back at the tent factory, Rash said his approach to the problem had set aside years of work to make his factory more “lean.” It’s not uncommon for a tent to require 48 separate pieces, she said, and when you can’t rely on getting all of those items, you tend to stock up on what you can – which is visible in the corners of the factory.

Leading the way through a labyrinth of shelves, she picks up a galvanized steel tube. “I have a hundred, which is good. I’m going to go through that, “she said.” But the two (tube sizes) that I’m out of stock, I can’t get them. “

Reporting by Daniel Schneider & Timothy Aeppel; edited by Edward Tobin

Our Standards: The Thomson Reuters Trust Principles.