Interview with Dr. Jochen Fabritius on the current raw material situation

Mr. Fabritius, at the start of 2021 and getting even more severe during the last few days, we could see that the industry is facing unprecedented shortages in key raw materials and additives. How do these affect your business?
JF: First of all, it is important to note that thanks to our globally connected teams, we are managing our supply chain quite well. The important message to our customers therefore is: We are doing everything to make sure we fulfill your orders. The shortages are caused by two factors: First, a significant spike in demand at a time when supply is still ramping up, and second, by logistical issues, e.g., the blockage of the Suez Canal, a shortage in sea containers and a significant global shortage in pallets. These will potentially lead to a very significant increase in freight costs worldwide.

What is the reason for the raw material cost increases?
JF: There is no one answer to this question, the situation is rather complex. The increase is mainly triggered by a strong economic restart post Covid-19 in many parts of the world. This has led to a strong demand for key raw materials, for base chemicals and specialties which affect our entire construction chemicals business. But this increase is in no way satisfied by the current production capacities of our suppliers: There are many force majeures caused by many factors including the explosion of an epoxy plant in Asia, winter storms in the US, technical damages in some crucial plants in Europe and economic lockdowns in many countries. So high demand and low production – the result is a sharp cost increase in a magnitude we have not seen in a long time.

What is your view about the outlook and how do you plan to overcome this challenging situation?
JF: Again, our deliveries are well managed. But the situation itself will likely not improve for the remainder of the year. It will take months to recover from this situation. Production capacities need to ramp up in order to meet all demand and the global logistic issues need to be quickly resolved. Our strategy is to continue to be a reliable partner to our customers. This also entails being predictable with regard to price increases, which usually will follow a regular review based on the long-term cost trend of our input factors. This is important, as our customers in return, must submit cost estimates to their own customers, and therefore do not like surprises. However, given the extreme situation we are experiencing in 2021, we are in an exceptional circumstance where additional price increases are required. We have one of the broadest product offerings in the industry and our sales professionals will continue to work closely with our customers to ensure that they are aware of all product offerings and alternative solutions so that they can take the best decisions.