We have had many customers with concerns and questions with regard to the coronavirus and our situation with regard to the virus and our supply of products to customers. We have decided to publish the following letter from our president, as follows:
Attn: Erie Powder Coating Customers
RE: China and coronavirus information
Concerned Customers:
We have had many questions and concerns regarding information on the coronavirus, specifically with regard to China and sourcing of materials and supply lines for our products, with concern to any disruptions in supply. Specifically, we have had information requested by some of our customers dealing with questions such as:
- Which ERIE products we supply might be affected in the current situation
- If Erie has alternate sources of materials to Chinese materials.
- If we have stock to cover the next 90 days
- Risks to open orders or projects.
In general for Erie Powder:
With regard to supply of raw materials, Erie Powder is in a very favorable situation compared to many of our competitors. Some of our competitors source virtually 100% of raw materials for their powder coatings from China, and some directly import finished powders. Due to the current situation, it puts those powder suppliers in very precarious positions. Fortunately for Erie, we have made a long habit (at times to our detriment, ie with pricing) of preferentially purchasing materials from N America. Thus, our supply lines are tight and in a very good situation.
Erie Canada sources only a small minority of raw materials that is coming (indirectly) from China and Erie does not source any raw materials directly from China. Our US operation, which is of a similar size (for production) to the Canadian facility, uses almost no Chinese materials at all in part due to the more recent “Trump Tariffs” on Chinese materials. Our US operation has used very little Chinese raw materials for the last year or more.
There are some materials such as some organic pigments, TGIC, that are simply, literally, not manufactured anywhere else in the world any more. However, between local stock and US based distributor stock, we do not anticipate any difficulties with supply unless the current problem becomes significantly extended.
To answer your questions more directly and specifically:
- Due to the very light amount of Chinese raw materials we purchase here at Erie, and the long term use and agreements with N American raw material suppliers, we do not see that any of our finished products will be affected unless China shuts down all manufacturing for a very significant time period, a situation we find extremely unlikely. This is in regards to supply. However, if the raw materials markets tighten up due to lack of worldwide supply, we may see raw material pricing increases. Given the current situation as we understand it, pricing, not supply would be the “worst case scenario” unless the situation gets much worse.
- We have alternative (non-chinese) raw material supplies for all materials with few exceptions. This has become very important for our US operation and we source from the same suppliers and the “Trump Tariffs” have kicked in the last year. The exception is for some raw materials that are not made currently anywhere else worldwide (such as TGIC). However, even for these situations, there are non-direct alternatives (eg, TGIC-Free formulations for TGIC chemistry) and currently, the supply is good.
- We do not foresee any problems for supplying materials normally supplied to our customers over the next 90 days.
- We do not foresee any problem with supply of any open orders, whether that is blanket orders or custom make and ship, or for stock products at this time.
We understand that this situation could be stressful.
In answering the questions above, we have to be careful to note that we cannot predict the future or further “black swan” events that may occur in the future which may further affect this situation. If the current situation takes a significant and unexpected downturn, then obviously the overall situation and supply may change.
However, given the current conditions, we are confident that there should not be any supply issues that will affect our operations that would in turn affect our customers.
Please call us or your representative if you have any questions.
Sincerely,
Brian Coutts
President