Walking uphill under a blazing sun is hard enough — but it's even harder if you're carrying a backpack full of bricks.
That must be how North American plastics processors are feeling these days, as they try to keep a business recovery going while saddled with ever-climbing resin prices. April's 15-cent shock increase on PP, and a 6-cent polyethylene hike that same month, are the latest reminders that high resin prices can be a limiting factor on business growth.
In some cases, resin makers' hands have been tied because of higher prices for their own feedstocks. Buyers, of course, don't like to hear this defense, especially when a resin supplier is integrated with those materials, essentially shifting costs from one ledger column to another. And who's more likely to absorb these increases? Your local injection molders, blow molders and film extruders, or Wal-Mart, Target and Costco?
The numbers are hard to ignore. Average regional selling prices for injection-grade, homopolymer PP are up 25 percent so far in 2011. Taking it back to Oct. 1 shows an increase of almost 30 percent. Increased use of natural gas feedstock — which produces a smaller amount of propylene than crude oil does — has tightened supplies of propylene needed to make PP. We've already seen this shift start to affect North American PP sales, which fell 4 percent in the first quarter, according to the American Chemistry Council in Washington.
The story in PE isn't quite as extreme, but it's far from good if you're a resin buyer. So far in 2011, average selling prices for blow molding dairy grades of high density PE are up more than 12 percent, and almost 20 percent since Oct. 1. Surprisingly, higher prices haven't yet affected regional demand for HDPE (up 6 percent in the first quarter) or linear low density PE (up 1 percent). Regional sales of LDPE, however, fell 1 percent.
The blow to PET bottle resin has been even greater than that suffered by PP. Prices for that material are up almost 40 percent since Oct. 1, magnified by tight supplies of paraxylene and purified terephthalic acid feedstocks. That's presented a double whammy to PET buyers, who are buying less material — a result of massive lightweighting in bottles — but paying considerably more.
Regional prices for injection molding grades of high-impact polystyrene are up about 17 percent since Oct. 1, mainly as a result of fluctuations in price for benzene feedstock. But PS could be seeing sales gains as processors migrate away from higher-priced PP. The opposite trend occurred for most of the last decade, so PS processors may be tempted to say turnabout is fair play.
PVC price hikes have been milder, about 10 percent since Oct. 1, but it still lead a dual existence: export bull and domestic bear. Worldwide growth spurred U.S./Canadian PVC exports up more than 30 percent in the first quarter, even as construction market weakness sent domestic sales down more than 4 percent. That push-pull left the U.S./Canadian market up more than 6 percent — although the flatlining of domestic sales remains a bit shocking, especially considering how weak 2009 and 2010 were.
So what's an innocent resin buyer to do? Many are switching to lower-priced materials, even though the lower end is rising as well. In extreme cases, product designers are turning their backs on plastic altogether.
Early 2011 seems like a good time to be in the waxed-cardboard business.
Designers also are finding ways to design their products using less and less resin per part/pound/square inch, as well as using more recycled resin from a variety of sources. This practice will draw a wink and a smile from those who admire good old North American ingenuity — but you can bet it's going to draw a different reaction from makers of prime resin.
Esposito is a Plastics News senior reporter who covers resin pricing.