Manufacturers of medical disposables are suffering a triple blow due to the rising costs of oil worldwide. In common with other manufacturers, higher fuel prices have made the manufacturing process itself more expensive.
On top of this, many disposables are made in the Far East and the cost of transporting them to Europe and the US has risen steadily with the increasing oil prices. Adding insult to both these factors, the use of oil-derived plastic resins as base materials for these means the price has also varied with the rising cost of oil.
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The glove industry is a good example of just how costs for disposables have changed over recent months. A lot of medical gloves on the market are made in Malaysia, Indonesia and Vietnam, and there is now a growing medical glove industry in China.
Many of these industries have grown due to the large rubber plantations in the region. However, problems with latex allergies have led to some medical users shying away from latex rubber and looking to synthetic materials instead.
A popular alternative to latex for gloves is nitrile, the use of which is growing. Nitrile is an organic compound, the history of which dates back more than 200 years, though its use as a synthetic rubber is much younger. “The use of synthetic gloves such as nitrile as an alternative to latex is growing quite rapidly because people are concerned over latex allergies, wrongly in my opinion,” says Peter Phillips from the Surgical Materials Testing Laboratory. “Some hospitals have gone totally latex free.”
But nitrile, along with materials such as polypropylene (used much in the medical world, notably for syringes) is made directly from products derived from oil refining. Over the past 12 to 13 months the price of oil has soared from $66 to $147 a barrel and though it has fallen back a little bit since then the price has not reflected this. Overall, according to Nick Finney, supply chain manager for Polyco, a company that both imports finished products from Asia and does some specialist manufacturing itself, the cost of a case of gloves has seen a large increase in recent times.
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By GlobalDataAs an example, a case of 1,000 premium grade medical gloves from Malaysia in 2007 would have cost between $20 and $25. This year, the price is nearly $35, an increase of between 40 and 60% in just a year.
Biofuels and beyond
Sticking with latex is also not a solution as many of the rubber plantations in the Far East have been cut down and replaced with palm oil plantations to service the biofuel industry. This has created a shortage of latex with the obvious knock-on effect on latex prices. “They have been cutting down rubber plantations and planting palm oil plants,” says Finney. “This has been happening for six to seven years now but in the past three years it started really taking off. For some time, the price of latex has been depressed but now there is an increase.”
This has not been helped by the tyre industry switching from synthetic rubber because of the cost of oil back to latex, putting pressure on already dwindling supplies. Nitrile has seen its prices rise by 80 to 90% in just the past two months and it is in short supply.
“There is a suspicion that some people are rationing stocks and holding back supplies to keep the prices high,” Finney says. But a spokesperson for Unigloves, which sells medical gloves into the private sector, said that latex and non-latex gloves had seen similar price rises. “The general price of gloves is rising,” the spokesperson said. “But it is a price increase for all companies so it is not affecting the market for any one company”
Gary Jeans, purchasing manager for medical supplier Eureka Direct, says that his company tried to absorb as much of the increase as it could before passing it on to customers.
“There is still a reasonable margin and we can consume some of that,” he explains. “But there will be a point where we can’t do that [and] then our prices will move but our competitors will have to do the same, so the end user prices will increase. I can see prices continuing to go up for at least the next six to 12 months.”
The weak US dollar has also had an effect on the market with the shift from trading currencies into trading commodities, the largest of which is oil, but other commodities affected include latex rubber and food stuffs such as wheat and rice. These food stuffs have seen their prices increase threefold, which has created further inflationary pressures in Asia, where many medical disposables are made. This is particularly noticeable in Vietnam, where inflation is starting to run out of control.
The industry has also been subject to a temporary blip in the supply chain due to the increase in medical glove production in China. Because the country has been reducing manufacturing times in a bid to get the air quality down for the Olympic Games, supplies of gloves from China has decreased. “This has put pressure on the supply chain,” says Jeans.
Stretching the alternatives
An alternative to latex rubber that is still plant based and therefore less reliant on oil products is guayule.
There is nothing new about the use of this shrub for producing rubber, with serious research projects into its use dating back to the 1920s. But these were abandoned because extracting the sap from a shrub was much more difficult than it was from a tree.
However, the discovery that guayule does not cause the same allergic reactions as latex has led some companies back to the plant as a viable option. Yulex in the US has led the way in producing guayule-based medical products and in April this year the US FDA approved the use of guayule for a patient examination glove. For the US and Australia, guayule also removes some of the transportation costs of latex as there are plantations in Arizona and Queensland respectively.
Other large chemical companies have been steadily moving away from oil-based plastics to bio-plastics made from various crops, sugar cane being popular. Dow, for example, has invested heavily in a Brazilian factory to produce polyethylene from sugar cane. This is scheduled to open in 2011. And Brazilian chemicals group Braskern is following suit. There have also been investments in the US to make biodegradable plastic from corn starch. Even in the UK, Innovia Films in Cumbria is building a production line to make plastic film from wood cellulose.
Some will argue though that the recent price increases are nothing more than a correction in a market that has seen the charges for medical disposables held artificially low due to competition between manufacturers and distributors. “In recent years there has been a price war and prices have come down,” says Phillips. “Now manufacturers are saying that if they don’t increase their prices to reflect the costs of raw materials they will have to pull out of the industry.”
Finney agrees: “We have reached a point where any increase that comes through has to be passed on. Some companies are saying pay up or we will stop manufacturing. It is a new era where things will be more expensive.” All too true, when you realise that hospitals too, are being affected by the current oil crisis.
