Dive Brief:

• Ongoing resin supply issues attributed to extreme weather events earlier this year are causing Sherwin-Williams and PPG Industries to struggle to produce paint, executives said in Q3 earnings calls.
• Resin supply hasn't fully recovered from Hurricane Ida and the Texas deep freeze in February, Sherwin-Williams CEO John Morikis said. Raw material prices are up over 20% for the company, and costs rose from Q2 to Q3.
• Supply chain disruptions prevented PPG from "completely fulfilling our strong order books" and impacted $350 million in sales, according to CEO Michael McGarry. The company expects supply to normalize in early 2022 as it adds more raw material suppliers and expects fewer force majeure declarations from existing partners.

Dive Insight:

Resins are essential to things like adhesives, industrial pipes and plastic straws, and suppliers are still reeling from extreme weather events earlier this year in addition to other supply chain delays facing businesses across industries.

In Texas, factories are working to come back online after a deep freeze caused significant damage to pipes, Morikis said. Meanwhile, Hurricane Ida shut off power to facilities and impacted utilities like water, which are essential to production. Nitrogen, which is used to prevent explosions at facilities, has also been in short supply as producers focused on making oxygen during the COVID-19 pandemic.

But extreme weather only compounded existing issues among resin suppliers. Many resin producers were unprepared for a spike in demand after slashing their inventories at the beginning of the pandemic, according to Rajeev Prabhakar, a chemicals, energy and industrials partner at Kearney.

"The demand grew, but we were also we were starting a supply from low inventory levels across the supply chain," said Prabhakar. "Everybody had depleted their inventory when demand collapsed last year so there's not much buffer."

Shelves at retail stores have remained bare as "there's just not enough paint out there," said McGarry of PPG. Suppliers didn't properly invest in their production capabilities, he said, and were caught flat-footed as demand began to recover.

"They postponed some things, and they got caught short by the recovery," McGarry said. "And so as they postponed maintenance or underspent, that has impacted their ability to deliver what we wanted."

Some resin producers have also seen issues from upstream raw materials suppliers, according to Prabhakar. Force majeure declarations from those suppliers "cascades down the supply chain and creates force measures and supply shortages across the board."

There are signs the supply situation is beginning to stabilize as the number of force majeure declarations declines.

"There are sort of glimpses of light at the end of the tunnel," Prabhakar said. "Barring any further disruption from weather or other issues, I think the supply side should have the opportunity to catch up in the next few months here."