One of the biggest non-stories of the past few quarters has been the price of plastic resins, and by extension, the price of crude oil. Don't get me wrong, resin pricing is of the utmost importance to people who make their livings in plastics (i.e. the readers of this newspaper). And the price of crude oil is a huge factor in the overall performance of the global economy.
But a really interesting story, even for an economist, has an element of drama. And for one of the few times in my memory, there has been a dearth of drama in materials pricing. For the past year and a half, the prices of both resins and oil have stayed within a relatively tight range (which means low volatility) at a moderate level by historical standards.
These conditions are good for managers and owners of companies who buy resin because they lower the risk of running a business. So I will concede that maybe you could use a boring story once in a while. I will even bet that many processors would like to lock in these low-drama conditions forever.
But we all know this situation will not last forever, and when it changes, it can change quickly. So the question is, as always, "What happens next?"
About 20 years ago, I was asking myself this same question. At that time, I was interested in comparing the trend in resin prices to the trends in other materials such as aluminum, glass, paper, copper and lumber. To facilitate this analysis, I created my resins prices index. This index is based on a weighted average of the published price of the top six thermoplastic resins by volume. It is expressed in cents per pound, and it is derived from the data that is published in the back of every issue of Plastics News.
This index is not the actual price you may pay for any particular resin, but rather it is intended to capture the underlying trend in the price of all resins. And as you can see, the index correlates closely with the monthly average price for crude oil expressed in dollars per barrel.