Over the past several months, we have continued to provide you with updates on potential supply chain impacts due to the COVID-19 pandemic. In addition to current pandemic impacts, we are also seeing other supply chain disruptions due to natural disasters occurring across the country over the past month. While the situation remains fluid, below is an update based on the latest information we have today and is accurate to the best of our knowledge. We are working diligently to provide you with the most current information possible, knowing this information could change at any moment.
Product and Supplier Updates
There continues to be several product categories impacted due to the pandemic and we remain close to key suppliers through daily communication. Mexico continues to be the greatest area of impact, but we also continue to see impacts in South America (most notably Brazil), Puerto Rico and India that continue to drive major supply disruptions. As reported previously, many production facilities in Mexico and other countries continue to be challenged with reducing employee density due to community spread in their facilities and high employee absenteeism.
Most manufacturers that have been impacted for the past several months are nearing original production capacity levels, but it will take weeks — in some cases months — to clear their open backlog. Many manufacturers are working to add additional capacity in the United States on impacted categories, but we do expect continued disruptions into the fall as this capacity is brought online.
Most notable categories with continued supply disruption include:
- Circuit breakers – most notably 2 pole, 3 pole, GFCI, CAFI and combo breakers.
- EMT Fittings – 1/2”–4” compression and set screw connectors (produced in India).
- Box pads fiberglass and enclosures have seen extended lead times of 20–30 weeks (produced in Mexico).
- Utility pole line construction material and hardware (produced in Mexico).
- PPE products – Most notably disposable respirators and disinfecting sprays and wipes.
- Power fuses.
- Nail-in and weatherproof boxes.
Over the past month, we have seen several natural disasters across the country, including Hurricane Isaias that hit the East coast, some of the largest wildfires in California’s history, the derecho storm that did significant damage to the state of Iowa and now Hurricane Laura, which made landfall near the Texas/Louisiana border late last week. These compounding natural disasters are putting additional strain on the supply chain for many categories.
The area in the Gulf of Mexico impacted by Hurricane Laura is home to many of the largest polyethylene resin producers in the world used in manufacturing products such as PVC pipe and fittings, medium and high-density natural gas distribution pipe and HDPE conduit. It sounds like most manufacturers were spared the worst of the damage; however, there could be short-term impacts to resin supply and lead times.
In addition to PE products, many utility product categories have already been strained due to pandemic manufacturing impacts and increased demand. Many suppliers are seeing reduced storm stock quantities and increasing lead times due to current events. Low voltage URD is a category where we continue to see lead times increasing (out to 16 weeks) due to high demand and now exacerbated by storm response. Three phase transformers continue to see increased demand and strain on capacity, seeing lead times at over 30 weeks with most suppliers.
We continue to stay in close contact with our suppliers to understand impacts and risks associated with these natural disasters.
We also continue to stay in close contact with major third-party freight carriers, and we are seeing concerning trends in the freight industry. With less-than-truckload (LTL) and full truckload (TL) shipments, national capacity is about 65% of where it was before the pandemic. As many carriers furloughed or reduced staffing at the beginning of the pandemic, they are finding it challenging to bring staffing back quickly and efficiently.
With many state economies reopening and shipment volumes increasing, many carriers are experiencing clogged distribution networks due to increased demand and shortage of capacity. This is creating shipment delays and some carriers are not booking loads in specific markets and lanes due to lack of capacity. Although small parcel carriers have seen fewer challenges with capacity, in some cases, they are seeing increased transit times of up to 2–3 days due to increased demand.
Market Indicator Updates
Commodity volatility continues as countries continue to gradually reopen their economies.
- Copper is trading at over $3 per pound this week, up 25% over the past three months and 20% higher than last year. Copper continues to see gains due to increasing Chinese demand and continued pandemic-related supply chain impacts in South America.
- Aluminum pricing is up 15% from April, which was the low point of the pandemic.
- Brent crude oil hit a five-month high on Monday due to strong Chinese demand for oil — as they continue to reopen their economy — and a weakening U.S. dollar. The West Texas Intermediate (WTI) has continued to see growth over the past three months but remains nearly 25% below this time last year. Concerns over demand forecasts through 2021 will continue to drive caution in returning to pre-pandemic production levels.
Our number one priority remains the health and safety of our customers, vendors and employee–owners. With all branches and most counter operations open, we have put in place additional safety measures to ensure the safety of our customers and employee-owners. Our curbside pickup method remains in place. We continue to maintain a no contact delivery policy for all Drivers. Additional information is available on our website regarding these measures and plans focused on health and safety in our operations.
We have also published an online resource page with more information about our current safety measures and featured products and solutions.
If you have any questions, please reach out to your Border States Account Manager for additional information or contact us online.