CGRS expert advice: with abnormally long lead times, don’t delay ordering tanks
Hurry up and wait!
That just about sums up the state of every supply chain right now as much of the world attempts to return to pre-pandemic life. Industries across the globe are struggling to overcome a backlog caused by lost time, a shortage of raw materials, severe weather-related impacts and a maritime fiasco. The fuel industry is no exception.
While many fueling businesses are eager to proceed with plans to build new gas stations or upgrade existing ones, it may be a while until they see their plans come to fruition. And they won’t come without significant financial considerations.
CGRS’ Refined Fuels department has received multiple notices from suppliers warning of extended delays and price increases because of the unpredictability and lack of stability of the supply chain, including production disruptions of key raw materials.
That’s why CGRS Refined Fuel experts advise anyone planning to build or upgrade a fuel system in the fourth quarter of 2021 or spring 2022 to get their financing in place and order their tanks as soon as possible.
How bad is it?
The major equipment with the longest lead times are fiberglass piping and fiberglass tanks. Whereas the normal lead time for fiberglass piping was two to four weeks in late 2020/early 2021, it is now taking 12 to 14 weeks to get piping. It took eight to 10 weeks for fiberglass tanks to arrive before late 2020-early 2021; now it takes 18 to 24 weeks, sometimes longer.
The lead time is even worse for steel tanks, orders for which some manufacturers cannot fill for 18 to 34 weeks.
The CGRS California Compliance and Construction team is reporting a 20-week lead time for ordering tanks and six months for dispensers, up from six to eight weeks for tanks and four to six weeks for dispensers in March.
Supply chain issues impact
While manufacturers of compressed natural gas/renewable natural gas (CNG/RNG) equipment remain competitive when it comes to the time it takes to get their products to customers, worldwide supply chain issues are impacting lead times for their industry as it is for liquid fuels.
Prior to the pandemic, customers could expect their CNG/RNG equipment to arrive in about 12 weeks. Now, compressors can take anywhere between 15 and 25 weeks, depending on the size. And, because of the shortage of steel, tanks can take 30-plus weeks.
So far, most manufacturers have increased their prices by only 5%, though some have raised them as high as 10% to 12%.
“I would suggest if they are wanting to have a CNG system in use in the next 18 months, they should start working on it now,” advised CGRS CNG expert Cory Kahler. “I do not see prices coming down much from where they are now. With lead times and supply chain issues, no one can predict where this market will be in the next 12, 18 or even 24 months down the road.”
How we got here
The Industrial Specialties Manufacturing (ISM) blog describes some of the factors leading up to the supply shortage:
- The surge in purchases of plastic products during the pandemic, when manufacturers anticipated less of a demand
- A nationwide shortage of resin, used in fiberglass fittings, piping, tanks and glues, which is imported from China
- A severe hurricane season affecting hydrocarbon extraction (used to make plastic, rubber, solvents, etc.) in the Gulf of Mexico and American Gulf Coast
- Plastic manufacturing plants just now performing required 2020 preventative maintenance shutdowns, called “turnarounds,” which are taking around 60 days
- Unexpected oil and gas refining plant shutdowns for mechanical issues
- Overwhelming shipping volumes domestically and internationally, resulting in port bottlenecks, over-the-road truck capacity shortages, and container shortages for Asian exports, which has had a worldwide impact
- The winter storm Uri’s freeze, which crippled Texas and Louisiana chemical processing and plastics manufacturing as well as steel production
- Shortage of drivers, port labor and manufacturing employees
To make matters worse, the Ever Given – a 1,300-foot, Japanese-owned container ship en route from China to Europe – was stuck in the Suez Canal for days in March, preventing more than 300 other ships from getting to their destinations, according to the New York Times. This has only made it more difficult for refined fuel contractors to obtain the equipment and materials they need to proceed with customers’ projects.
What’s the outlook?
CGRS experts say there is no end in sight for these extended lead times. While some suppliers anticipated supply chain delays and placed large orders for fuel system equipment and materials earlier, those who didn’t will have a substantial wait – as will their customers.
And customers will also have to deal with the other consequence of high demand and low supply: higher prices.
Since the end of 2020, the cost of tanks – whether steel or fiberglass – has increased 50% or more, and fiberglass piping has tripled in price. For other fuel system materials, CGRS experts are seeing prices between 50% and 300% higher than last year.
By ordering tanks and any other equipment they know they will need now, customers can lock in current prices, rather than risk paying even more if they wait. Those who order big items now will have to have a plan for storing them if they arrive ahead of schedule or before they are ready to proceed with their projects. They will also have to determine what to do with that equipment if they choose not to go through with their projects.
How can CGRS help?
If upgrading your tanks and/or piping or installing a new fuel system is in your plans, CGRS Refined Fuel experts can help determine what you need and move forward with procuring the equipment. Our reputation with manufacturers means we can assist you in the ordering tanks process, ensuring you get what you need, lock in the best price and get the equipment within the shortest timeframe possible. We can also help find locations for storing tanks until you’re ready for them. Call our Refined Fuel experts now at 800.288.2657.