A combination of COVID-19-driven demand, catastrophic weather and logistical challenges has created resin supply shortages that are pushing prices up for plastics manufacturers.
February 2021 saw the largest increase in resin prices on record in a single month, and March is close behind. A shortage in supplies has increased demand and prices of both polyethylene (PE) and polypropylene (PP).
A slowdown in international imports throughout 2020 led to a reliance on U.S. manufacturers that typically sell 40% of production into the export market. While this increased domestic sales, the demand for resin still outstrips the supply by a significant margin, leading to what PlasticsToday calls an “unprecedented imbalance.”
Multiple Factors Influence Volatile Resin Pricing
Logistical, environmental and pandemic-related challenges have exacerbated the ongoing resin shortage:
- Oil prices have increased 58% since November
- A global shortage of shipping containers
- A strong global market demand for resin
- Non-tariff costs related to Brexit (EU market)
Compounding these issues is the winter storm that shut down resin plants across the south and brought the U.S. production of PE and PP to a halt. PlasticsToday reports that the mid-February storm continues to dig “a very deep hole in inventories throughout the supply chain” with losses that may reach 5 billion pounds or more.
While Texas may have thawed, the halt in production is expected to have lasting impact on the resin market throughout Q1. Power outages also led to frozen pipes, damage to facilities and equipment, and a disrupted supply chain that will take time to rebalance.
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