Houston (ICIS)-US-based Stepan expects that the supply chain challenges will slowly improve in the fourth quarter, the CEO said on the company's third-quarter earnings conference call.
Chairman and CEO F Quinn Stepan said: “When we look at the supply of key raw materials entering the fourth quarter, the situation is slowly improving, and we expect that this situation will... become even better as we approach 2022. good."
However, "Looking forward, we believe that our surfactant sales in the North American consumer product end market will continue to be challenged by the availability of raw materials and transportation," he said.
The company estimates that the supply chain disruption caused its polymer and surfactant business to reduce its third-quarter operating income by $7 million year-on-year.
President and Chief Operating Officer Scott Behrens said that in the third quarter, due to rising raw material supply and cost, the company's polymer profit margin was significantly affected, while customer orders were still restricted by its own raw material supply and other supply chain issues.
For example, Behrens said that upstream suppliers declared force majeure for the key raw materials used to produce polyols, while Stepan customers encountered shortages of methylene diphenyl diisocyanate (MDI) and flame retardants, the supplementary raw materials used in their finished foam insulation formulations. .
Behrens said that the resulting inflation is almost unprecedented, and as inventory levels throughout the value chain are depleted, supply security becomes important.
He said that ensuring that products are delivered on time to supplement customer orders is more important than price negotiation.
Vague demand picture supply chain disruption also makes actual demand less clear.
For example, the agency’s high demand for surfactants is due to actual consumption—increased use of public spaces and the need for more significant cleaning and disinfection—rather than inventory building, Behrens said.
But he said that it is unclear whether the reduced demand in the consumer sector is due to destocking or delays related to supply chain disruptions.
He said: "In general, I have to say that supply chain disruption may inhibit more demand than destocking." "And... we believe that until the supply chain disruption is eased, inventory levels across the value chain will remain low."
Energy issues in Europe and Asia Behrens said that in its European operations, Stepan has so far found no energy-related disruptions in surfactants or polymers.
He said that the supply chain constraints in the region are mainly focused on the supply of raw materials-such as shortages of wood, windows and other building materials, which hinder construction demand.
However, Behrens said that the Chinese industrial market has experienced industrial power outages, which affected the supply of raw materials for Stepan and its customers.
He said that ultimately, these energy interruptions will affect the production of polymers and surfactants in Asia.
"In terms of duration, the good news is that there is potential demand in the market. Therefore, the motivation and motivation to alleviate these supply chain disruptions is strong."
Quinn Stepan added that given the supplier’s forecast for the restart of the facility, the company is confident that this situation will improve in the fourth quarter.
Stepan products are used in a variety of fields, including coatings, adhesives, sealants, and elastomers; construction; cleaning; insulation; oil fields; and personal care.
Focus articles by Antoinette Smith
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