Polystyrene plastic pellets utilized by Alpha Rho. Photo: John Savone
Now that the second quarter of 2021 is already underway, the trend is clear: the prices in the resin market are increasing, and if the gap between supply and demand doesn’t shrink, it will continue to go northwards throughout 2021.
Week after week, we see a steady climb in the prices led by supply shortages amid increased demand. Some buyers have become creative amid this crisis by being more liberal with their requirements, expanding their regular technical specifications and product packaging requirements.
Understanding the Root Cause of the Crisis
When COVID-19 hit the world, almost every country, including the United States, went into lockdown. This created a climate of uncertainty and suppliers started to de-stock fearing the unknown future.
The supply situation was impacted again when the USA faced the worst hurricane in years. Once the lockdown started to ease, the logistics industry was overwhelmed with the expanding gap between the rising demands and supply shortage.
With time, the world demand continued to surge, while the supply side of the chain was still reeling from a number of other disruptions. Winter storm Uri brought freezing temperatures and record cold to Texas and Louisiana, shutting down the entire petrochemical-producing region, including refineries and chemical operations.
State of the Resin Market
If we look at the current state of the Resin market, we can see that the disruption that started with COVID-19 continues to affect logistics even today.
Some direct impacts of post-COVID-19 on the resin market can be seen in:
- Staffing protocols being followed for production facilities, ports, and logistics
- Last-minute changes in schedules due to symptomatic employees
- Days of labor being removed due to quarantine production shifts
- Slow maintenance at plants due to reduced on-site labor
- Shifting of the population from high-cost areas
- Purchasing power parity favoring unemployment rather than returning to work
Before Storm Uri hit, thermoplastic resins were already tight or on allocation.
Demand for most thermoplastic is much higher than the supply. Although Europe and Asia are seeing a strong surge in demand, the supply is tight due to the slowing import-export trade. Several resin producers are on formal allocations or force majeure. Looking at the domestic market, demand from the key end-market sees a surge since 2020 especially in areas such as packaging, healthcare, automotive, building and construction, electrical, electronics, appliance, and consumer products.
As of Feb 26th, 12 days since Uri, 10,200 railcars of production have been lost which translates into 1.9 billion pounds. The production lost during this period is gone forever. The coming weeks are critical to recovery, requiring a large number of plants back online to reach the targeted allocation.
The Future of Resin Supply
The shortage of materials for packaging and consumer items could cause consumer panic and lead to hoarding, especially if the supply doesn’t reach its pre-COVID level. This could impact the complete polymer supply chain. Hyper demand could lead to high prices and ongoing allocations.
But Here is the Good News from Alpha Rho
There are resins that are still less impacted in this uncertain climate. These include: PPE/PPO, PSU, PPS, CPE, PEI, and Transparent Styrenics.
At Alpha Rho, we use PS – polystyrene for our high-quality rigid plastic boxes.
Count on Alpha Rho for fast delivery, personal customer service, and just-in-time delivery from our expansive warehouse, reducing our customers’ inventory expense. Don’t take our word for it, hear directly from our customers!
If you need help to find the right packaging for your product, the experienced professionals at Alpha Rho are ready to help.
Contact us today with any questions, concerns, or for more information about our product line.