When manufacturing a product, there are often left overs and waste materials. Sometimes, that waste can be re-purposed, for example, you can pay someone to dispose of your old cooking oil, or you can donate/sell it to bio diesel manufacturers instead. No brainer, right? Same is true of chemicals.... for example, acetonitrile and HCl are waste products of polymer manufacturing; when you make the polymer, you make acetonitrile and HCl. But if the polymer is in oversupply, acetonitrile and HCl are not produced... no matter how desperately the material is needed. This is what I call an "inverse" relationship: when the key product (in this case, the polymer) is in over supply and cheap, the co-product gets scarce and high priced. Like Newton said, "For every action, there is an opposite and equal reaction."
In a co-product relationship, there are at least two products: the economic driver and the waste product.
The economic driver is the primary product being produced and determines whether the waste product is produced or not. Below are examples of criteria for the economic driver:
Some of the worst and most impactful shortages we've experienced have been caused by the co-product relationship because the risk is hidden. In order to anticipate these risks, know 1) whether your product is the economic driver or co-product and 2) monitor pricing and production rates for the economic driver. Low prices or cuts in production rates for the economic driver is your leading indicator for market tightness.
Examples of Co-Product/By-Product Relationships: