Click here to view the article in the digital edition of August 2021 Modern Casting.

Louie Franco never studied meteorology, but as the manager of corporate purchasing at ME Elecmetal based in Tempe, Arizona, he’s developed a keen sense for forecasting and preparedness which is serving him well in the present climate of severe chemical shortages. Watching freight delays unfold early this year and keeping his eyes and ears open to every available human and Internet resource, he strategically plotted the path of an evolving chemicals supply snafu—and took action to buffer his company from turbulence.

“I thought about what could be the potential long-term problems with this freight issue,” he said. “And then where else are we going to see this issue? I’m in the trenches and I’m always dealing with people. It’s almost certain if one part of the industry is having issues, it’s probably going to happen somewhere else.”

If a single North American foundry is yet untouched by the scarcity of chemical supplies and the pricing explosion, it probably won’t remain unscathed much longer. Everything under the sun that could have gone awry has done so with gusto, industry sources chorus. Factors ranging from global pandemic and clog-ups within every transportation system to bad crops in China, ice storm in Texas and the dearth of U.S. skilled labor have collided in what sources agree is a bizarre twilight-zone situation none of them has experienced before. The result: a rebounding and even ravenous economy has been hog-tied by both natural and manmade influences, for which neither metalcasters, suppliers, economists or pundits seem to have a ready solution.

For foundries, the situation is manifested in tight supplies of petrochemicals like petroleum and all its byproducts including binders, resins and phenol alcohol. The FA family of organic resins is in particularly short supply. 

Oddly enough, says Franco, his foundry operations colleagues have been kept insulated and more or less unaffected by the widespread pinching on chemicals necessary for the many various stages of casting. He indicated his well-timed and sizeable orders have the company on solid ground for months to come. 

Tell Me Where It Hurts

Not every foundry is so fortunate. Asked to rate the industry pain on a scale of 1 to 10, as physicians ask their ER patients to do, one chemical supplier, Jim Mancuso, owner at AFS Corporate Member Mancuso Chemicals Ltd. in Ontario, responded that the foundry chemical supply chain is between a 7 and 8, where usually it’s at 2 or 3.

“There’s always some little issue somewhere in the world, but you can switch geographies, you can switch suppliers; it’s just inconvenient,” Mancuso said. “Now, we’re no longer in an inconvenience. We’re at 7 or 8, which means there are some actual consequences happening, and the consequences are relatively widespread. Some part of the industry is seeing some hope—some chemicals are freeing up because Texas is coming back online, but others are more global in nature and are getting worse.” 
He added that his company is running 24/7 with very large inventory. 

“This [shortage] has been going on now for six or seven months; we’ve tried to mitigate shocks, but it’s getting impossible,” he said. “The only way to fix things at the moment is to throw a lot of capital at the problem to try and buy the raw material that is available and get it to the facility—not only our facility in Canada; our facilities in Peru and Mexico are also feeling the exact same pressures. We used to run production schedules three or four weeks in advance; now, instead of running it based on what we know, we’re running our production schedule based on what is available today. And that is a different universe of operation that creates far more complexity.”

Converging Causes 

Circumstances beyond mortal control created unprecedented pent-up demand for consumer and industrial goods, which is, at least for the moment, held hostage by society’s negligence in maintaining its infrastructure and propagating the human capital required for ordinary times—and desperately in such a time as this. 

China’s chemical production slowed in 2020 not only because of the pandemic but due to substandard crops grown there, which are used to make organic-based resins. In addition, even as recently as this summer, COVID-19 outbreaks have closed Chinese ports, further detaining exports to North America. 

Production also slowed in Europe, sources said, and, of course, the Texas ice storm in February took plants offline and brought domestic, oil-based chemical production to a near halt, a disaster that is still not completely rectified as damaged equipment continues to be replaced.

“They’re working very hard to get those plants restarted, said American Chemistry Council (ACC) Chief Economist Kevin Swift. “It’s not off-the-shelf type of equipment. If the pump in your fish tank goes, you can go to your local pet supply store and get a replacement. A pump in a chemical plant is specific for that particular plant for that specific location within the plant. In a lot of cases, they had to air freight things like pumps over from Korea or Germany. 

“The last time I looked at MDI and polyether polyols, around 60% of the capacity in the United States was offline at one particular point. For polyethylene and some of the big things like that, it was generally on the order of 30% or 40%.”

When demand came roaring back as early as last fall, both supply and the ability to move it were caught unprepared. While chemical companies declared one force majeure after another, freight and hence pricing on end-user chemicals has rocketed from 30% to 100%.

Sea Sick

Meanwhile, ocean freight-liner companies have struggled to keep up with concurrent and overwhelming demand in every part of the world; and the temporary Suez Canal blockage in March caused even more cargo ripples across international trade waters. 

Congestion at ports has been well documented in the mainstream media, as are gross backlogs in trucking and rail. Ironically, a vicious circle has ensued, whereby labor-deprived transporters on land are unable to swiftly unload containers and return them to service—these increases in dwell time continue to hinder carriers from getting their ships back on the seas. 

“When vessels are delayed because they can’t get in [at ports] to unload and load cargo, it just pulls down the whole system,” said World Shipping Council Executive Director John Butler. “One independent analysis indicated that those types of slowdowns, which are really outside of the control of the ocean carrier on the TransPacific trades, had the effect of reducing capacity by 25%. When you think about it in those terms, capacity is only effective if the assets are moving; having them sit still has a really dramatic effect.

“It’s a question of velocity,” he continued. “The way the whole intermodal system works, particularly the international ocean piece, is it’s all about keeping ships and containers moving. So if a container is sitting either empty or full, it’s not moving cargo; it’s just sitting ... Whether that’s sitting on a terminal, whether that’s sitting in a warehouse, whatever the case may be, it’s just not available [to move anything else].”

The fact that not all ships are qualified to carry hazardous materials, like foundry chemicals, merely exacerbates the situation. As does the regulated, special storage that chemicals require once they arrive on land. 

Playing Favorites?

When supply is short, patience runs low, and some have alleged that big-box retail is commanding higher priority positions on cargo ships than industrial and manufacturing sectors. Butler, however, says the shipping industry is doing everything it can to keep all its customers happy—some shipping companies have publicly stated their frustration in not delivering the level of service they’d like, he added.

“The reality is, everyone’s feeling the pain because of all these disruptions—whether they’re on land or otherwise—they are making it harder to move cargo even as we’re moving a record amount of cargo, and that’s something that sort of gets lost in the discussion. 

“Understandably, if you’re trying to import a particular chemical that’s necessary to your industrial process, and you’re having trouble getting it, that’s what you’re focused on,” Butler continued. “You don’t have time in your day to say, well, gee whiz, at least we’re moving more cargo than ever before. That’s, not what you’re thinking about. 

“What I can say is that ocean carriers aren’t picking and choosing and favoring one type of cargo over another,” he added. “People have service contracts, and the carriers are doing their very best to honor those service contracts. But there are as many different arrangements between carriers and cargo interests as there are carriers and cargo interests. How people have structured those relationships does have an effect on [carriers’] ability to move cargo.”

Butler compared the vast demand and limited transportation capacity to pouring 10 gallons of liquid into a coffee cup. Nevertheless, he said, ocean carrier companies are hunting down every available container and vessel they can locate and put into service. They’re also ordering more ships, but since they take three years to manufacture, that new inventory obviously won’t come online in time to right the ship of current strain.

How Do You Spell Relief?

While ships, trains and trucks continue to work out tangles to the best of their ability, and as Texas refineries come back online, one question begs an answer: Why can’t chemicals produced overseas be reshored to North America and thus solve the supply chain challenges in much the same way metalcasters are solving supply chain issues for many OEMs these days?

The problem stems from a purely regulatory reality, said Randy Sandstrom, Western Division operations manager at Porter Warner Industries, a chemicals and equipment supplier that serves thousands of foundries with coast-to-coast locations across the lower half of the U.S. FA resins, for example, are made from corn husks and rice hulls, and manufacturing the chemical is a dirty process that hasn’t been seen in the U.S. for years—the carbon tax any American manufacturer would incur makes too unfair a playing field, so countries like China and India took over. 

“It is probably fair to say it will never be produced in the United States,” said Sandstrom. “Unfortunately, the problem right now is, you have shortages and chemical distributors go wherever they can to get it. It’s a supply and demand issue, and if they can get it, the price is going to be really quite high, which has already been seen.” 

If matters worsen to the point where a foundry cannot obtain products such as furan, Sandstrom is sharing Plan B advice for some of his customers: “You can’t stop making castings, so start looking at other resin systems out there.”

Because crop-based furan is cyclical, some foundry customers have, in the past, switched to an oil-based phenolic urethane system, he said, but even this is in short supply today. But there’s still another alternative if a foundry is able to make a change, which is easier if moving from one acid-based resin to another.

“One of the options that they’re looking at right now is a fairly old resin system—it’s a phenolic acid system,” he said. “At the end of the day, if you can’t get product, I believe [changing resins] is what you have to do.”

As supply disruptions impact both foundry customers and foundry suppliers, AFS Corporate Member Waupaca Foundry is adapting and making necessary changes. 

“These supply disruptions affect not only Waupaca Foundry’s team, but also our customers’ and suppliers’ teams, said CFO Rob Johnson. “Ultimately, this is requiring greater and timely communication both internally and externally with our partners. Waupaca is executing contingency plans, which validates why these plans are important.  

“For example,” he continued, “Waupaca Foundry must source alternative materials, which are sourced further from our operations. Waupaca Foundry’s demand of these alternative materials in turn can cause supply constraints in other industries who primarily use and rely on these materials.” 

How Much Longer?

Reluctant to predict a timeline for chemical production and transportation to return to some semblance of normalcy, sources didn’t rule out shortage duration into 2022. Associations like the ACC are remaining focused on educating lawmakers and government agencies, but government intervention or oversight could be risky, some sources indicated. 

Franco at ME Elecmetal still believes international communication would be helpful. “The governments have to talk to each other to try to fix the congestion,” he offered.

Communication across the supply chain is, in fact, the best medicine for foundries and suppliers to take till the tight chemical market eases, according to Butler.

“The advice I would give to people, and I know with all the chaos that’s going on it’s often difficult to get in touch with a human being at your [shipping] service provider, but that’s where the solutions are,” he said. “Be persistent. If you’ve got a problem with somebody that you’ve got a contract with, you’ve just got to keep asking them ... sometimes there are things that carriers can do.

“When you have this massive overload of cargo, the information systems and the communication systems are not perfect, and they are admittedly overwhelmed. I know it’s hard to get answers. But keep persevering and find somebody to talk to ... sometimes there are operational solutions that wouldn’t otherwise be obvious.”     

Click here to view the article in the digital edition of August 2021 Modern Casting.