US winter storm disrupts supply chain for automotive industry

Author: Janet Miranda

2021/02/23

HOUSTON (ICIS)--The polar wave that swept through the US Gulf Coast has disrupted supply chains throughout the country, including intensifying the global semiconductor shortage after several chip manufacturing plants were forced to shut down.

Samsung shut down its Austin semiconductor plant due to the recent blackouts in Texas, after Austin Energy asked all large-scale manufacturers to shut down to put residential customers back online.

The company said prior measures were taken to safely shut down production, although it did not specify when production will restart.

“We are currently making efforts to resume as soon as possible, “said Michele Glaze, director of communications at Samsung Austin Semiconductor.

NXP, which has two plants in Austin that make chips for a variety of electronics, including automobiles said that it was warning customers of the potential for supply disruptions.

“We are carefully monitoring the situation and will resume operations in our Austin facilities as soon as possible,” said David Reed, executive vice president at NXP.

Reed said that once power is restored, NXP will be able to evaluate the impact of the shut down and when full production will resume.

While chip manufacturing output in the US is smaller than in Taiwan and South Korea, this shutdown puts even more strain on the global semiconductor chip shortage that has slowed down automotive production.

Chemicals make up about one-third of the raw material cost of an average vehicle.

The unprecedented freezing temperatures have also paralysed a significant portion of US refineries and petrochemical plants in the region.

The National Association of Chemical Distributors (NACD) said that many of its members have experienced supply chain disruptions, including container ship backups at the ports of Los Angles and Long Beach in California, manufacturing facilities shutdowns, and force majeure notices on products.

“We anticipate these disruptions will cause tightening in the market for several weeks if not a month or two as these operations come back online and regain full operations. Coupling all of these issues with driver and truck availability shortages cause us to believe this next quarter will be difficult for many,” said Eric Byer, CEO of the NACD.

Specialty chemicals and coatings businesses could be affected more directly as they will be exposed to higher raw material costs as a result.

RPM international already lowered its guidance for its fiscal third quarter because of disrupted transportation, distribution and supply chains throughout North America.

Freight delays and a shortage of truck drivers is expected to increase the price of transporting goods.

“We had a facility in Memphis and Dallas which got completely snowed in. Power problems and water outages impacted us in those facilities as well, carriers were unable to pick up orders that were fulfilled and workers were unable to get to work,” said Casey Adams, president of Visible Supply Chain Management, an e-commerce logistics firm.

He expects a large ripple effect from the storm with freight prices nationwide experiencing a tight and erratic market.

“I do not see that lessening, I see the storm as having made freight prices a little bit worse,” said Adams.

Focus article by Janet Miranda

Thumbnail image shows an automobile. Photo by Ng Han Guan/AP/Shutterstock

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