THE HEADLINES:
- Our polymer storage tanks are full
- Water-base lead times are now below 2 weeks for most orders
- All hot melt lead times are back to normal
Dear Valued HAR Customer -
They say
the third time’s the charm. Well, this is the third time I have started to draft a letter to inform you that the supply situation has finally improved. My first attempt was in August of 2021. So, if you’re reading this, that means it’s finally happening...
It has been nearly two years since a deep freeze in Texas crippled their electrical grid and froze chemical plants state-wide. This disaster ignited a chain reaction of lesser events over the next 18 months that could not be overcome because of the deep hole the freeze had caused.
This is the world we have all lived in for nearly two years.
These events caused extreme supply shortages and created an open season on price increases like we have never seen before. For two years, most price increase discussions began and ended with the exclamation:
“There is nothing we can do.”
Many of you have asked us:
“How has HAR been able to keep us supplied during these turbulent times?”
The simple answer is this: through our relationships.
- First: We have long-standing personal relationships with valued supplier partners who more than treated us fairly because of our loyalty. During this crisis, they worked tirelessly to keep us informed, even when the news was bad. This allowed us to plan.
- Second: We have incredible customers like you that trusted us and worked with us. We asked you to spread out your orders. Only take what you need. Be careful not to over-commit. This miraculously allowed us to stay one step ahead of your needs over 99% of the time.
The attention to detail required over the last two years was off the charts:
Attention to detail + loyal long-term supplier relationships + our customers working with us = the ability to keep you supplied.
As you’ve heard me say before: We pride ourselves on being responsible, dependable, honest, and fair and attending to each relationship like it is special, ultimately creating “win–win” relationships of mutual respect and mutual benefit.
Well, these past two years have monumentally stress-tested this promise. Over this trying period, we have been thoughtfully told by many of you that our support of your business was really appreciated and in some cases, critically important to your survival.
Some simply said:
“We know how hard you are trying”
Comments like these and the continued development of relationships with our key suppliers and many customers have made all of the effort, sacrifices, and worry very worthwhile and rewarding.
While I cannot deny there was a lot of worrying, today we are happy and relieved to finally announce that
our polymer storage tanks are full and our lead times have been reduced below two weeks for most water-based items and back to normal for all hot melt orders.
As always, we will continue to do our best to handle your emergencies, when the unexpected results in a need for an even faster turnaround of your order.
So, what about pricing?
Well, we have seen little evidence of any price relief at this time. But, the fact that our suppliers are telling us we can have some additional material, seems to imply to me that things are softening. I, for one, believe a little slow down of our economy at this time might be needed. Big oil companies and large chemical manufacturers have been emboldened by the events of the past two years. They are mostly publicly traded companies and their record profits are well documented.
There is one big factor and two lessor factors that are impacting our costs to manufacture. They are:
- Natural Gas: On average, 90% of our water-based formulas and a high percentage of our Hot Melt formulas use chemicals derived from natural gas. In January 2020, just before the freeze, the cost of natural gas was $2.05. It reached a high of $8.93 in August of 2022. It currently sits at $8.12.
- Oil: The remaining 10% of the chemicals we use are derived from oil. From the beginning of 2017 to the end of 2019, oil averaged about $115.00 a barrel. In May of 2020, oil hit a pandemic-influenced low of $19.00 a barrel. Oil hit a high of $119.00 a barrel in June of 2022. Today oil sits at $87.00 a barrel.
- Inbound Freight: Freight costs hit a high in July of 2022, increasing by over 34% from pre-pandemic levels. Today freight costs remain high. The variable causes are well known: the cost of diesel, labor, and equipment. Additionally, service disruptions, industry consolidations, and constrained networks remain post-COVID-19. Hit especially hard and most affecting our costs are: overseas containers, rail, chemical tankers, and most inbound full truckload shipments. Experts believe freight rates will remain at these higher levels until demand begins to soften.
So, as much as we are all enjoying lower prices at the pump, oil 20% below recent historical levels will have very little influence on most of the adhesives we sell.
Regarding pricing, here is our promise to you our valued customers:
AS SOON AS WE BEGIN RECEIVING PRICE DECREASES, SO WILL YOU!
We are well aware that we exist because you allow us to be your source for adhesives. We take this responsibility very seriously. We hope our actions over the past two years have met, or maybe at times surpassed, your expectations.
We come to work every day with one thought:
“To provide adhesive and adhesive application equipment service and support beyond your imagination.”
Thank you for putting your trust in HAR over these incredibly difficult times. We look forward to a return to normalcy and the opportunity to continue to earn your business, hopefully growing together, and maybe being a small part of your future success.
Most Sincerely,
Joe Cerino
President
Readers are invited to use the links below to find and contact a local adhesives representative that can help with your company's industrial adhesives needs: HAR Adhesive Technologies has a presence in seven distinct states, uniquely focused on serving the adhesives, adhesive application, and equipment needs of each region in:
Ohio,
Indiana,
Kentucky,
Michigan,
New York,
Pennsylvania,
West Virginia