Department of Chemical Supply Chain Difficulties: Ukrainian neon, invasion edition

Via the New York Times, this news about the Russian invasion of Ukraine, and the disruptions to the various flows of chemical products: 

...Automakers could see shortages of other key materials. Ukraine and Russia are both substantial sources for palladium and platinum, used in catalytic converters, as well as aluminum, steel and chrome.

Semiconductor manufacturers are warily eyeing global stocks of neon, xenon and palladium, necessary to manufacture their products. Makers of potato chips and cosmetics could face shortages of sunflower oil, the bulk of which is produced in Russia and Ukraine...

 A brief Google search led me to this comment from the Korea Herald: 

Semiconductors are also expected to suffer collateral damage from the Ukraine crisis. Ukraine is a major producer of rare gases essential for chips such as neon, argon, krypton and xenon. In particular, Ukraine produces almost 70 percent of the world’s neon gas.

As Korea imports 23 percent of neon, 30.7 percent of krypton and 17.8 percent of xenon from Ukraine, the crisis can potentially push up their prices and cause complications in their supply chains. 

Why does Ukraine produce so much neon? A fascinating reason from the past, apparently: 

Neon was regarded as a strategic resource in the former Soviet Union, because it was believed to be required for the intended production of laser weapons for missile and satellite defence purposes in the 1980s. Accordingly, all major air separation units in the Soviet Union were equipped with neon, but also krypton and xenon, enrichment facilities or, in some cases, purification plants (cf. Sections 5.4 and 5.5). The domestic Soviet supply of neon was extremely large but demand low."

- "Following the collapse of the Soviet Union, global crude neon production was approximately 500–600 million l/a (= 500,000–600,000 m3/a). It was dominated by far by large-scale air separation units associated with metallurgical combines in Russia and Ukraine. Simultaneously, demand was estimated at around 300 million l/a (cf. Section 4.2). In the years between 1990 and 2012, therefore, most crude neon was not purified, but released into the atmosphere, because there was no customer base."

(If you don't want to trust a translated German source from Y Combinator, there's also this Japanese article from 2016 that says much the same thing.) 

Can't imagine that this is good for the global economy in the short run, although it will be interesting to see if yet another insult to a near-single source encourages more suppliers to enter the noble gas markets in the long run... 

Urea prices are going up

That's a big bag of urea. 
Credit: NYT

Via the New York Times, a story about rising urea prices: 

This is a story about one of those unsung forces that quietly keep the world running. It is a story about the clockwork interconnectedness of modern civilization, about how disturbances in one part of the planet can kick up storms in another.

This is a story, naturally, about urea.

Prices for the humble chemical — yes, the stuff in urine — are soaring to levels not seen in over a decade. In this time of everything shortages and inflation worries, that alone might not sound too surprising. But urea links up several disparate-looking strands of global economic disruption, showing how easily extreme weather and shipping turmoil can cause supply shortfalls to radiate.

People and industries of all kinds are feeling the shocks. In India, a lack of urea has made farmers fear for their livelihoods. In South Korea, it meant truck drivers couldn’t start their engines...

...China and Russia, two of the biggest producers, have restricted exports to ensure supplies for their own farmers. In China’s case, an energy crunch led some areas to ration electricity, which forced fertilizer factories to slash production.

Hurricane Ida drove several large chemical plants to suspend operations when it tore through the U.S. Gulf Coast in August. Western sanctions on Belarus have hit that nation’s production of potash, the key ingredient in another fertilizer. Port delays and high freight fees — plant food is bulky stuff — have added to costs.

This seems like something directly tied to high energy prices, as well as high shipping prices. It will ultimately end up with higher food prices, which is not great. Will be interesting to see what the Fed does in response... 

Supply chain issues hitting very basic chemicals too

Via the Associated Press: 

In an economy upended by the coronavirus, shortages and price spikes have hit everything from lumber to computer chips. Not even toilet paper escaped.

Now, they’re cutting into one of the humblest yet most vital links in the global manufacturing supply chain: The plastic pellets that go into a vast universe of products ranging from cereal bags to medical devices, automotive interiors to bicycle helmets.

Like other manufacturers, petrochemical companies have been shaken by the pandemic and by how consumers and businesses responded to it. Yet petrochemicals, which are made from oil, have also run into problems all their own, one after another: A freak winter freeze in Texas. A lightning strike in Louisiana. Hurricanes along the Gulf Coast.

All have conspired to disrupt production and raise prices.

“There isn’t one thing wrong,” said Jeremy Pafford, head of North America, market development, at Independent Commodity Intelligence Services (ICIS), which analyzes energy and chemical markets. “It’s kind of whack-a-mole — something goes wrong, it gets sorted out, then something else happens. And it’s been that way since the pandemic began.”

The price of polyvinyl chloride or PVC, used for pipes, medical devices, credit cards, vinyl records and more, has rocketed 70%. The price of epoxy resins, used for coatings, adhesives and paints, has soared 170%. Ethylene — arguably the world’s most important chemical, used in everything from food packaging to antifreeze to polyester — has surged 43%, according to ICIS figures.

It's hard to know when all the various pandemic-related supply chain issues will be over. 

The negative effects are obvious, i.e. if you can't get product, you can't sell it and your revenue projections go down, so you dial back hiring. 

It seems that there hasn't been a major impact on hiring yet, especially for the companies that do the bulk of hiring out of graduate school. That said, it bears watching, and I think it poses the largest obvious threat to the 2022 chemical employment market. Developing...