The world is in the middle of a supply chain crisis – with companies in every sector grappling with serious challenges!
In this post, we look at the roots of the crisis, how supply chain challenges are impacting on the gas cylinder industry, and what this means going forward.
Global Shipping Capacity
The pandemic, and the global response to it, has caused a global shipping crisis.
From the early lockdowns and quarantine rules, through to the 2021 Suez canal blockage, it’s been a turbulent couple of years!
Lockdowns caused by China’s zero covid policy produced bottlenecks at their ports including the world’s largest cargo port of Ningbo-Zhoushan, a lack of dock workers in the USA and labour strikes in Europe, set against rising demand driven by post-covid recovery is creating extremely challenging conditions.
Demand is outstripping supply, sea freight prices are at record levels, and space on containers is at a huge premium.
Unfortunately, there is no quick fix solution, and it seems inevitable that high shipping prices, longer lead times and capacity constraints will continue during the first half of 2022. Looking forward, shipping companies have suggested that things may begin to improve in the second half of the year.
Wider Logistics Challenges
It isn’t just shipping where there are problems. The logistics issues are being compounded by a shortage of commercial drivers in the US, UK and Europe. This isn’t a new problem – drivers have been leaving the profession for some time now, but the lockdown restrictions have made the situation worse.
For large periods of the pandemic, driving test centres across the world have been shut, creating a bottleneck that is preventing new drivers from entering the industry. This has been great news for drivers, with wages rising significantly. However, it has also led to an increase in road freight costs and delivery lead times.
Raw Material Pressures – Aluminium and Carbon Fibre
The global supply chain issues, and other challenges caused by the pandemic are having a knock-on effect on some of the key raw materials used in the manufacture of gas cylinders.
The pandemic has caused significant disruption to global mining and manufacturing which has caused a world-wide shortage of aluminium. This is being exacerbated by rising demand from the recovering Asian market, and the effects of the Suez blockage in the spring of 2021.
As a result, aluminium prices have more than doubled since the start of the pandemic. In many cases, cylinder manufacturers simply can’t get hold of enough aluminium to increase manufacturing capacity.
There’s a similar story when it comes to carbon fibre – rising demand and supply constraints have pushed prices to record levels.
War in Ukraine
It is too early to understand the full ramifications of the Russian invasion of Ukraine but we can already see some effects. For example increases in fuel costs and air-freight re-routed to avoid Russian airspace.
The Shift to Sustainability
Against the backdrop of shortages, price rises and supply chain constraints, the cylinder manufacturing industry is also looking to improve its ESG (Environment, Social and Governance) credentials.
At AMS Composite Cylinders, we take our commitment to sustainability seriously, and have been implementing policies and standards for several years, to ensure we’re at the forefront of the industry when it comes to our treatment of people and the planet.
We understand that our responsibility doesn’t end with our own manufacturing practices – it needs to go right through the supply chain. While others may be tempted to compromise on their principles to alleviate supply chain pressures – we are resolutely committed to doing business in the right way despite the pressures.
The Real-World Impact on Cylinder Manufacturers
At AMS Composite Cylinders, we have done everything possible to mitigate the impact of these challenges on our customers. Our supply chain has proved to be very resilient, especially in comparison to the wider industry, but it has had an impact.
Although we have kept price increases to a minimum, and lead times are longer than we would like, through improved manufacturing capacity and efficiency, we are managing to protect our customers from the impact of these supply chain problems. Going forward, we will continue to invest in making our supply chain even more resilient, doing everything possible to increase capacity to ensure consistent and timely supply to customers worldwide.
For customers, our advice now is to take the extended timescales into account and to place orders early to avoid delays.
Solutions – From Just in Time to Sustainable
The challenges we’re facing as an industry are far from unique. Businesses in every sector are dealing with the same kind of problems from a shortage of semiconductors in the car industry, to a shortage of glass bottles in the drinks industry.
It’s causing a real shift in behaviour. For the last 50 years, manufacturers have been moving towards a ‘just in time’ model – prioritising costs, keeping stock to a minimum and using short-term contracts so they could adjust to meet demand.
The current challenges have laid bare the shortcomings of this approach. Now, the trend is firmly moving towards ‘sustainability’ – shoring up the supply chain and building resiliency by keeping more stock on hand, and signing longer term contracts with key suppliers.
Short Term Issues or Fundamental Changes
Although it is a challenging time for everyone – there is some light at the end of the tunnel.
It looks likely that the shipping situation will start to ease later this year, and the strategic changes that manufacturers and customers are making will mitigate the issues in the long term.
These times of crisis are also driving innovation in communication, monitoring, logistics and product development, which will positively transform the way we all do business.
Covid Demand and Long-Term Outlooks
Demand for gas cylinders continues to grow – especially in the medical gases sector. During covid, there has been unprecedented demand for medical oxygen cylinders – especially from the healthcare facilities in developing countries that lacked integrated oxygen delivery systems.
The long-term impact of covid on respiratory health may increase demand for portable oxygen cylinders in the future.
Globally, respiratory conditions are on the rise. COPD is the world’s third biggest killer, after heart disease and cancer, and treating COPD is driving a sizeable increase in the need for home oxygen therapies.
A rise in other respiratory conditions, such as asthma, combined with an ageing population seems likely to add to this growth in demand.
Advanced Lightweight Gas Cylinders from AMS Composite Cylinders
AMS Composite Cylinders supplies a full range of advanced, lightweight Type 2 and Type 3 gas cylinders to customers across the UK and Europe.
Our cylinders are used in a wide variety of applications, including healthcare, respiratory, SCBA, laboratory, industrial, emergency, aerospace, and environmental uses.
Producing cylinders to a wide range of recognised global standards, we hold accreditations in all major markets worldwide. We manufacture to ISO and EN standards (including ISO-11119-2, ISO 11119-1, EN 12257, EN12245, ISO 7666, and ISO 11118 ) and to the requirements of UN PED/TPED, DOT (USA) and TC (Canada).
For additional information AMS Composite Cylinders, our gas cylinders and our accreditations, please contact ustoday.