All in it Together?

The 2006 made for television movie, “High School Musical” was the most successful Disney Channel movie. Ever! The movie spawned a franchise of follow-up movies, stage musicals, books and video games which have collectively done over two-billion dollars in revenue and have been watched by over a quarter-of-a-billion people.


In this “Romeo and Juliet meets West Side Story,“ high school students from competing "cliques" learn that despite their differences they are all in it together!


Which, as long as we are not all in trouble together, is a good thing.


When the power went out in Texas on February 14th, 2021 my daughter Buck Wheat, a six-month resident of THE Lone Star State, wasn’t the only Texan burring the last of her cell phone charge on calling the utility company asking when her power would be restored.


CEOs at the oil refineries along the Texas coast had the utilities on speed dial ever since they discovered that you need electricity to make oil into gas.

Pointing out the irony, like Allanis Morrisett!


The nation lost 40% of its refining capabilities in this weather crisis. An event so significant that the price of gasoline is rapidly rising around the country. Nationwide, gas prices are up more than $.25 per gallon since the storm did it’s damage. And it is expected to go up as much as another $.25 over the coming months.


Meaning whether they use delivery services or own their own trucks, dealers can expect to see significant increases in their costs to ship.


Which is the best news you’ll get from me today.


Shortages


The reduced capacity to refine petroleum, means a reduce capacity to manufacture the building blocks of (almost) all paints and coatings.


Resins, and the other chemicals refined from petroleum are the foundation for the liquid coatings sold by all stakeholders in the architectural and industrial paint markets in the United States and Canada.

And the bad news for the resin-hungry paint industry, is that gas is more important.

Which means the paint is going to wait.

I reached out to an industry executive recently to school me on how shortages caused by the crisis are likely to effect dealers.

I wish I had good news!


Refiners of petroleum have declared “force majeure," meaning an unforeseeable act prevents them from honoring their existing contracts.


Allocations


Currently, resins and other crucial chemical ingredients are on allocation with manufacturers getting between 30%-50% of their raw material needs met, depending on factors.


In a conversation which lasted only 15-minutes, this industry CEO used the term “crisis mode” multiple times which makes sense. Of the 24 refineries servicing our market, I am told only eight of them are currently producing product. It may take as much as another month to get the rest back online and producing to their capacity.

Dealers should prepare themselves for months of product shortages.

And price increases.


Something about supply, and demand.


The industry executive I spoke with shared that it would be impossible to say at this point what the final effect of this event will be. Though they shared that they do expect to be dealing with the effects of this event for the “rest of the year!”


THE market will have to normalize before manufacturers understand their new costs or how much they will have to raise prices to keep their margins steady. Still, I’m told that while there is some uncertainty about the size of these increases dealers should prepare themselves for high single-digit increases on most products with some products such as epoxies going up as much as 30%!


Dealers looking to protect themselves from the effects of this event may already be too late as many finished goods are already out of stock. But if it's not too late, you should take action to mitigate the effects of this crisis on your business And order what you can.


Dealers and manufacturers are all in this together.


And we are all in this together. Isn’t that great?




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