Because most plastics and rubber products are intermediate components utilized in end products, demand rises or falls in line with overall manufacturing activity. Current tariffs and trade disputes are impacting pricing and supply chain dynamics, but the outlook for this sector remains stable overall.
North American light vehicle production is expected to slow in 2018 compared to the two prior years and may cool further in 2019, according to Wards Intelligence. Commercial truck, construction and agricultural vehicle production will also drive demand for tires, hoses and other rubber and plastic components. Output for heavy-duty trucks is booming to keep up with orders from trucking companies taking advantage of the latest technology and performance updates.
The plastics and synthetic rubber sector is particularly sensitive to fluctuations in raw materials such as feedstocks from oil and natural gas. While manufacturers usually pass along price increases for raw materials, higher oil prices can lead suppliers to look for alternative options.
The sector faces pressure from tariffs and trade disputes. Tire manufacturers are impacted by steel tariffs due to tire-grade steel wire rod used in domestic tires, especially since there is not a domestic source for this vital material.
Tools for plastic injection moldings are becoming more expensive with the rising costs of steel. Many tools are made in Canada, where steel is subject to a 25 percent U.S. import tariff.
Rubber and polymer products imported from China, including tires, are subject to tariffs, putting pressure on margins on finished goods. Molding and processing machines are affected by the tariff-driven cost increases as well. Meanwhile, China has retaliated with tariffs on hundreds of billions of dollars worth of U.S. goods, including many rubber and plastic products. In some cases, there are no other sources for a particular product, so a manufacturer must deal with added costs. If alternative sources are available, manufacturers must rapidly adjust their supply chain to ensure a steady flow of materials and finished products.
The industry is evolving in response to its customers. For automotive and consumer goods, product lifecycles are becoming shorter, so manufacturers are asking rubber and plastics suppliers to reduce their timetables for design, development and production. This, in turn, puts pressure on the supply chain to meet demands for more responsive manufacturing.
Research shows manufacturers faced with a rapidly changing global supply chain are increasingly partnering with an Enterprise Logistics Provider experienced in global trade regulations and practices. The visibility and discipline required to manage a global trade strategy deliver benefits for an agile supply chain. Our connected LEAN approach cuts across silos to remove wasted cost and effort to ensure your supply chain can keep pace with your competitive environment.