The import, export, manufacturing and production industries are experiencing a variety of problems in Q1 2021 within the areas of market supply and demand, material shortages and pricing, with these industries and variables closely related and affecting each other. Plastic resins are the key focus material with other materials including steel, lumber, microchips and even ketchup in short supply.
There has been an unprecedented rise in the current market price of plastic resin, spot resin, associated raw materials and precursor ingredients. Factors such as the worldwide COVID 19 pandemic, supply chain problems, production difficulties and lack of sufficient workers have contributed to current conditions. It is unknown when and if price increases will stop, slow or return to normal. Price results indicate resin and raw materials have reached record highs along with a reported producer price index (PPI) increase of roughly 30%.
Market Materials Experiencing Shortages in Q1 2021
Current high focus materials experiencing shortages in the USA for Q1 2021 include steel, lumber, microchips, ketchup and the resins and raw materials used to manufacture plastics.
Market Forces and Scenarios Affecting Resin Pricing
Perhaps the largest scenario affecting resin prices and material shortages was, and is, the Coronavirus COVID-19 pandemic. The worldwide event impacted much in the areas of product demand, ability to meet supply and ability to maintain production as plants and other facilities were forced to shut down. Demand is high in current conditions due to a recovering economy and society while resources are extremely limited in some instances due to a major interruption in the normal flow of import, export, supply and demand. There are many market sectors affected by COVID-19 and there is a significant relationship between industrial and market sectors when it comes to the use and need of raw materials.
The world is changing in how business operates, in everyday living, in technological advances and health standards. Some of these changes are occurring rapidly or have occurred rapidly in response to COVID-19. More people are working from home, there are less workers in the field aiding production and supply, commercial drivers are in short supply meaning less material is moving, and the world is competing for what resources are available. All this while vaccines and healthcare products need produced and distributed, new computers made for work, new automobiles manufactured, new homes and commercial structures built, and general consumer items and food needs maintained and available.
Increased consumer spending, (perhaps ironically), is also contributing to the overall problem. The U.S. Federal Reserve reported national economic activity accelerated between February to April 2021. Due to governmental support, stimulus bills and a reopening workforce, some people are buying more or are back to spending as things recover. While good, the result is an increase in demand on an already strained resource supply system and is therefore contributing to the competition over available materials and driving price increases.
- Plastic Materials and Resins – As probably goes without saying, plastics play an increasingly integral role in global society. The number of products and devices made from plastics or that contain plastic components is countless. The shortage in plastic materials can largely be attributed to shutdowns due to the Coronavirus pandemic. Raw material production plants, logistic supply chains and fabrication facilities shut down or operated at highly reduced capacity, while stockpiles were depleted as conditions continued to worsen.
- Steel – The shortage in steel is a result of low raw resources, low inventories, mill shutdowns and a disrupted transport system resulting from the worldwide COVID pandemic. Steel imports are low or non-existent; also an effect of shutdown. Demand has also increased in some long standing industries, such as automobiles, further adding to the situation. Backstock inventories are, in many cases, depleted and order requests are beginning to line up and overshoot the industry’s ability to yet supply, meaning significant lead times and likelihood of rising prices.
- Lumber – Demand for lumber outweighs available supply, market prices have soared, doubling or tripling in some cases. This is placing strain on construction projects, contractor jobs, increasing home prices and causing significant losses in pre existing contracts. The lumber shortage can be largely attributed to the COVID-19 shutdown of lumber mills that halted US and Canadian production. The US is looking to increase imports from Europe in response to offset the recovering industry workforce.
- Microchips – The shortage of microchips is largely a result of the spike in modern living requirements around electronics and electrical components. From computers for remote work, smart things to everyday electrical devices, microchips are a key part of how our lives continue to evolve and operate. This trend is not slowing either, with smart cars (self-driving vehicles) steadily coming into production and contributing to the demand.
- Ketchup – Largely considered due to the Coronavirus pandemic, the shortage of ketchup is being attributed to an increase in the consumption of comfort food such as fast food, French fries, etc. by consumers. The trend is considered in connection with lightening COVID-19 restrictions and shutdown as people look for a way to relieve stress and regain a sense of “normalcy” and are essentially eating more ketchup as they eat more comfort foods.
Continuing Market Pressures Will Likely Cause Prices to Continue to Rise
Worldwide conditions and events have contributed to current market levels and are believed will continue to drive prices upwards prior to decreasing, if prices will decrease again at all. Although governments, economy and the public are straining towards recovery, repairing the impacted system will take time. Gaps and holes in production resources and supply chains must be repaired. And these chains are reliant on other contributing pieces in the overall economy where many rely on the condition, supply or operational ability of another. If one major component fails or cannot recover, it can produce a bottleneck or altogether restrict supply and production. Market pressures such as the continuing production of marketable products, increases in technological advancements and changes in societal standards will likely contribute to rising prices as it affects overall market supply, resources and ability to meet demand.
Subscribe or Follow Us for Updates
Current Resin Prices and Prior 12 Months
The various plastic resin types are offered in the market and their prices are tracked by manufacturers, processors and recycling companies. The common resin and plastic types include polypropylene (PP), acrylonitrile butadiene styrene (ABS), ethylene and polyethylene (PE) in its various forms: e.g. HDPE, LDPE, polyethylene terephthalate (PET) etc. among many others. Prices for plastic resins and materials have risen to historical highs just within the first quarter of 2021. Since December 2020, the unprecedented increase in prices has seen a $0.285/lb rise in high density polyethylene (HDPE) contracts ending around $1.05/lb at the time of this report.
Some plastic price increases are compounded by increases experienced in their precursor ingredients or raw material. The monomer ethylene with a price spike to $0.425/lb is a good example of this as a precursor to PE.
|Spot Resin Prices||$/lb Low||$lb/ High||Contract Resin Prices||$/lb Bid||$/lb Offer|
|HDPE, Blow Mold||1.000||1.090||HDPE, Blow Mold||1.010||1.060|
|HDPE, Injection||0.930||0.950||HDPE, Injection||0.950||1.000|
|HMWHPE, Film||0.960||0.970||HMWHPE, Film||0.900||0.950|
|LDPE, Film||0.970||1.070||LDPE, Film||1.030||1.080|
|LDPE, Injection||1.010||1.020||LDPE, Injection||0.940||0.990|
|LLDPE, Film||0.910||0.990||LLDPE, Film||0.940||0.990|
|LLDPE, Injection||0.960||1.000||LLDPE, Injection||0.990||1.040|
|PP, Copolymer||0.930||1.395||PP, Copolymer||1.330||1.430|
|PP, Homopolymer||1.000||1.270||PP, Homopolymer||1.250||1.350|
The Plastics Exchange considers it unlikely that the North American spot resin market will release the grip held on material prices due to the number of backorders, low supply, diminished stockpiles and a bullish export market. For more on current prices.
A chart of current HDPE resin retail prices is provided below for an overview of the past 12 months to-date up to April 2021:
Producer Price Index Report of Resin Prices
The producer price index is a value used to scale average fluctuation in product selling prices. PPI is also related to inflation and demonstrates price change over time. Below is a clip from the U.S. Bureau of Labor Statistics (BLS) reporting the most recent PPI data for plastic resins and materials. Data from the U.S. BLS indicates a 51.8 point increase in the PPI value for plastic resins and materials from Nov. 2020 to Mar. 2021. The 51.8 point increase is an approximate 23.2% spike in the plastics PPI over a 5 month period.
Table Excerpt from Bureau of Labor Statistics: March 2021 PPI Detailed Report
The producer price index has steadily risen historically and relates to the observed increased product prices of today versus in the past. Large increases have been seen in the last 20 years with a sharp spike in the 2020 to 2021 timeframe. Historical data indicates the plastics PPI value has risen over time from 71 to 329 in the timeframe from 1976 to April 2021: 45 years. Therefore the current 51.8 point increase within the past two quarters is significant change. The current PPI spike for plastic materials is similar to a spike seen from 2002 to 2005. In this event, PPI did not return to pre-spike values from before 2005, and time will indicate whether the PPI for plastics will return to pre-2020-to-2021 values. Following is a chart of historical PPI values from the U.S. Federal Reserve Economic Data (FRED).
Chart of Historical PPI Report for Plastics Material and Resins Manufacturing
Follow Us for Updates
Takeaway: no one knows when price increases will stop, if they will stop or if prices will return to values prior to the COVID 19 pandemic and other events. While some market pressures influencing resin prices have alleviated or are in the beginning stages of relief, input costs associated with the problems have not yet been absorbed with supply, resources and time remaining key factors. Watching the market and keeping up-to-date on relevant news will indicate, over time, how plastic resin and material prices may change or stabilize.
Subscribe or follow us on social media for regular updates on current plastic market conditions, news and prices.