Are you able to maybe speak to some of the more specifics of the additive supply chain? What were some of the dislocations we saw there? In some ways I think people can understand base oil refining and how it’s connected to fuels. The additives market seems a little bit more complex or opaque if you’re not involved in the chemicals industry. It is more difficult to understand how this can lead to lubricant shortages.
Second order effects of lockdowns
Sulphur is a brilliant example. Imagine a PCMO additive package that’s being supplied by an additive company to a small as the “Mom and Pop” type lubricants manufacturer. Matter of fact is it’s been affected by the lack of availability of sulphur because refineries shut down [and were not desulphurizing crude]. Those kinds of second order effects will be specific to a particular additive or a particular additive type. This is just one example. It’s something that I’ve done in the past in my consulting, investigating everything in someone’s supply chain.
So there is a multidimensionality of issues that the chemical industry faced; the additives industry is just a small part of that. First of all you have COVID shutdowns at every single point in your supply chain. And when you start looking back at it, there may be Palm oil coming from Malaysia or Thailand. You’ve got metals coming from Chile or China for making greases. Then there is the metals coming from countries in Africa; you’ve got lockdowns in many of those countries. There were also lockdowns in the processing [of those metals], which may not be in the same country.
Finally lockdowns and shutdowns in the actual the chemical companies. All of these shutdowns are various points in the supply chain and affects availability. Therefore you have shortages of key ingredients in an additive package. To return to the Mom and Pop blender somewhere in the United States; they may have 20 to 30 different supply sources for the ultimate raw materials.
There are also shortages of truck or train drivers, or perhaps a social distancing rule or the hygiene rules preventing efficient transport. This happened in the United Kingdom with passenger rail. In some cases you needed to have two people in the cab of the train and with social distancing requirements you couldn’t get two people in the cab of a train. So the train didn’t roll. But then maybe your freight forwarding company or shipping company also can’t stack a barge or ship, and they don’t run. Of course later on in, in COVID we then got into the container shortages.
That became public knowledge. People were isolating at home unable just to get the work and then a container vessel blocked Suez Canal. Which can stop an awful lot of goods moving from the east to the west and an awful lot of empty ships returning. And these problems were all generic to the chemicals industry. So it is difficult to talk specifics because a detergent from one manufacturer has a completely different supply chain from another one.
Divergent vs convergent issues
The above are divergent issues which is why it’s so difficult to talk about specifics. But you also have convergent issues, where occasionally you have a single source of supply, but it’s four or five steps over the supply chain.
And I would suspect that happens somewhere; I’m not aware of it within the lubricants industry [yet]. But somewhere along the supply chain of certain additive packages or even just have certain individual ingredients there may well have been a single source of supply.