First chips, and now automakers face a new shortage: rubber

Automakers struggling with pandemic-induced plant shutdowns and a global chip shortage are now confronting another supply chain headache: dwindling rubber supplies.

Snarled shipping lines are disrupting the movement of natural rubber, a key material used in tires as well as components under the hood. With the global supply already running short following stockpiling by China and a devastating leaf disease, rubber prices are on the rise and some U.S. auto suppliers are rushing to secure shipments before the market gets squeezed further.

As companies in virtually every market grapple with shortages, perhaps no industry is being hit harder than autos. Multiple plants have been idled by a semiconductor crisis that’s costing tens of billions of dollars in lost revenue, while materials from seating foam to metal to plastic resin are also becoming harder to find. The industry, which has long relied on just-in-time manufacturing to reduce costs, is finding it has limited flexibility to deal with supply chain disturbances wrought by the pandemic.

The rubber shortage threatens to further disrupt vehicle production just as demand rebounds and the Biden administration douses the U.S. economy with $1.9 trillion in stimulus spending. And rubber problems could prove particularly thorny because the trees need seven years to mature, making it unlikely the supply will quickly bounce back.

“It’s like paper towels early on during the Covid crisis,” said Steve Wybo, who heads the auto practice group at consulting firm Conway MacKenzie outside Detroit. “If you can get your hands on some plastic, or some rubber, you’re going to order more than you need because you don’t know when you’re going to be able to get it next.”

Carmakers including Ford Motor Co. and Stellantis NV, formerly known as Fiat Chrysler, say they’re monitoring the rubber situation but have yet to feel an impact. General Motors Co., similarly, says it isn’t worried about its rubber supply. France’s Michelin, one of the world’s largest tire makers, is skirting port congestion by using air freight shipments direct from Asia.

But for suppliers reliant on U.S. distribution, rubber is already a concern.

“I’ve got everybody alerted that I’ll take materials as fast as they can get it to me,” said Gary Busch, director of global procurement at Carlstar Group, which makes tires for off-road and agriculture vehicles.

Natural rubber is produced from the white sap of trees found in the warm, humid climates of countries such as Thailand and Vietnam. While petroleum-derived synthetic rubber is preferred for some applications, the natural version has properties that are critical for products such as gloves and packaging tapes — both of which have seen demand rise during the pandemic. And as the critical component in tires and anti-vibration parts under the hood, it’s more closely associated with the auto industry than any other.

The rubber industry is dominated by smallholders, making it difficult for producers to adjust quickly as demand changes, prices fluctuate or supply chain problems emerge. It’s not the only commodity market finding there’s no easy fix: There could be a copper shortfall of 10 million tons by 2030 if no new mines get built, according to commodities trader Trafigura Group.