The lubricant additives supply chain already faced a trying year in 2020, and 2021 hasn’t started out much better.
Initially, COVID-19 shut down non-essential manufacturing and travel, greatly reducing finished lubricants demand and, consequently, additive demand. This was softened by lubricants marketers continuing to blend finished product and fill their warehouses in the event that their plants were also shut down. helped ease some of the impacts of shutdowns and restrictions faced by additive manufacturers, but it also threw off their forecasting.
The expected decline in demand led some suppliers to underestimate their material and production forecasts as the world grappled with the pandemic. This caused issues when manufacturing and commercial transport picked up and lubricants demand came surging back. Refineries that provide much of the chemicals used to manufacture lubricant additives, as well as the base oils taking advantage of the lull in demand, had closed for planned maintenance and thus were not able to provide the full volumes of chemicals that additive manufacturers needed.
More than two dozen force majeure events, such as the dramatic cold spell that caused chaos in the United States (Texas) and the Ever Given vessel blocking the Suez Canal, have made life “interesting” for the industry. The COVID-19 virus has already seen multiple waves of infections spread (most recently in India), which could continue to impact the lubricant additives industry. Transportation is also affecting additive supply chains, as traditional routes such as air freight (relying on passenger planes) have declined in capacity due to the reduction in flights; this has increased the demand for maritime, truck, and rail capacity.
Lubricants marketers are finding it difficult to obtain the additive quantities needed to satisfy their customer demand, and some additive suppliers have had to put their customers on allocation. Unfortunately, optimized global supply chains are at the greatest risk for bottlenecks should the pandemic shut down key material sources or disrupt shipping lanes and air transport as it is now. At best, it is hoped that the lubricant additives supply chain will return to some form of normalcy in a year’s time if vaccines can bring the pandemic under control, though it could take longer depending on how the virus mutates and spreads.
COVID-19 will likely cause some industry participants to shut down, while others will rethink their supply chain strategies and debottleneck, trying to reduce any single-source dependencies. This could also result in some companies partnering with smaller additive suppliers, working with them to build their technical capabilities so that they can become an alternative additive package supplier to help mitigate future supply risks. The year 2021 is likely going to be a trying one for the lubricant additives industry, as it has faced an unprecedented number of issues that were out of its control. The coming hurricane season may add to the misery.
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