It's October 2005. Do you know where your resin is? Unfortunately for many North American plastics processors, the answers to that question would range from ``No'' to ``I think so'' to ``Let me get back to you on that.''
The production outages and raw material shortages caused by Hurricanes Katrina and Rita along the Gulf Coast have sent North American resin markets into an unprecedented level of chaos and tumult. Some processors, faced with the very real possibility of not having enough material to make their products, stopped accepting new orders in late September. Once-chatty resin executives have fallen silent, lacking answers as to when and how they'll be able to get material to their customers.
The most difficult part for processors to take may be the fact that there aren't a whole lot of options out there. With well over half of North American commodity resin production centered in the Gulf, the broad swath of storm damage affected the industry's lifeline. Resin plants operating in the Midwest and in Canada already were operating at high rates even before the storms hit.
At this point, the discussion deteriorates into a petrochemical version of the old ``Hole-in-the-bucket'' children's song. Rising demand made the plants get tight. High prices for natural gas feedstock led to a lack of new plants. Limits on exploration and drilling led to low natural gas reserves, which led to high prices. As the song asks: With what shall I fix it, dear Liza, dear Liza?
Many of the affected plants are coming back on line, but a good number are still down and those that are coming back have lost at least 10 days of production.
Bringing commodity resin in from outside of North America would seem an obvious solution, but the market isn't yet equipped for such a reality, one that would send heads spinning from Michigan to Texas. Long delivery times also lessen the chances of that happening. And Middle Eastern commodity resin won't arrive in significant volumes until Sabic buys or opens a distribution hub here.
(Ironically, the slowing of Chinese polyolefin demand - a topic explored elsewhere in this issue of Plastics News - might bring the idea of Saudi distribution in North America closer to reality. The mega-sized resin plants coming onstream in the Middle East were dependent on a business model of ever-increasing Chinese demand.)
The current calamity also is stirring up talk of plastic being phased out by replacement materials. Most recently, building material suppliers have been asking around about using heavy paper bags or cardboard boxes to hold material previously sold in plastic pails. It's not a matter of a more durable material vs. one that splits and tears, it's now a question of having material to build the container in the first place.
At some point - hopefully not in the too-far-off future - plastics processors will look back at this moment and wonder how they got through. But for now, there are a lot of business owners looking down the train tracks behind their plants - and the roads in front - with fingers crossed, hoping those plastic pellets show up.
Frank Esposito is an Akron-based staff reporter for Plastics News. His beats include resin pricing.