Coronavirus, more accurately referred to as COVID-19, is beginning to impact global supply chains in a tangible way. Although it is impossible to forecast the effect of numerous epidemics worldwide on the fine chemical supply chain specifically, reports suggest that as much as 94% of the Fortune 1000 are already experiencing coronavirus-related supply disruptions.
Fortune cites the devastating 2011 tsunami as a case study of how unforeseeable disasters can severely disturb supply chains with far-reaching ramifications. Damage to Mitsubishi Gas Chemical factories in the area affected by the tsunami led to a shortage of bismaleimide triazine (BT) resin; a critical material for electronic substrates. Over 90% of the world’s BT was engineered in northeastern Japan at the time. The result was a significant delay in electronic chip production and assembly of consumer digital devices.
Understanding the Fine Chemicals Supply Chain
Much like the global electronics industry, the fine chemicals market is built on a closely intertwined supply chain that could easily be disturbed by the currently intensifying climate.
Specialty and fine chemicals occupy a small but lucrative niche of the global chemical industry; a closely interlinked market that relies on the reliability of supply. Complex and pure chemical substances (fine chemicals) must be sourced, screened, and delivered in a timely fashion to facilitate the synthesis of complex compounds (specialty chemicals) that are selected for their performance rather than their compositional values. These intermediates underlie a potentially limitless range of market-oriented and functional products, from pharmaceuticals to petrochemicals.
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In recent years, the fine chemicals market has – like many others – been characterized by an East vs. West dichotomy. Asian chemical companies have been growing at rapid rates with low investment costs and typically reduced costs associated with regulatory compliance. The growth of China’s chemical market has proven particularly disruptive to the US as major players continue to acquire valuable secondary assets and invest in new intellectual properties. Chinese API manufacturers and pharmaceutical companies now service an extremely large proportion of the global market.
How Will Coronavirus Effect Fine Chemicals Supply?
Fears of coronavirus-related pharmaceutical ingredient shortages are subsequently well-placed. Large areas of China have ground to a halt due to quarantine protocols, which have caused worker shortages, market shutdowns, raw material shortages, and so on. The logistics of how to manage the bottlenecks of provincial border checkpoints has also become a factor affecting the global supply of fine chemicals and pharmaceuticals.
Even once ingredients are manufactured and successfully delivered out of the country, strict quarantine protocols at destination ports can result in a further delay of at least 14-days. Cancellations of product shipments are increasingly common as the virus propagates worldwide. From a pharmaceutical perspective, this is potentially hazardous as the reduced supply of APIs and pharma excipients to manufacturers that rely on raw materials from the large Chinese market could lead to a shortage of key medicines. Industry officials say that this is far from the case thus far but add that sustained supply chain disruptions could impact the availability of medicines down the line.
From the point of view of petrochemicals, industry analysts actually predict a decrease in demand due to closures or decreased productivity of factories using petrochemical feedstocks downstream, such as plastics processing. Consequently, industrial fine chemicals are likely to be sandwiched by COVID-19 related logistical issues including reduced supply and demand.
Current Fine Chemicals Supply Situation at CABB
CABB Group is a leading fine chemical custom manufacturer of starting materials, advanced intermediates and active ingredients. CABB’s Custom Manufacturing business supports customers from 3 locations: Pratteln, Switzerland; Kokkola, Finland; and Jayhawk, USA to offer creative sourcing options while addressing supply chain security. We’ve minimized our raw material risk exposure and are working diligently to ensure continuous manufacturing operations and deliveries to global customers without disruption.
If you would like more information about our fine chemicals supply chain, simply contact a member of the CABB team today.