Skip to main content
Sister Publication Links
  • Sustainable Plastics
  • Rubber News
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Processor News
    • Suppliers
    • More News
    • Digital Edition
    • End Markets
    • Special Reports
    • Newsletters
    • Resin pricing news
    • Videos
    • Injection Molding
    • Blow Molding
    • Film & Sheet
    • Pipe/Profile/Tubing
    • Rotomolding
    • Thermoforming
    • Recycling
    • Machinery
    • Materials
    • Molds/Tooling
    • Product news
    • Design
    • K Show
    • Mergers & Acquisitions
    • Sustainability
    • Public Policy
    • Material Insights Videos
    • Numbers that Matter
    • Automotive
    • Packaging
    • Medical
    • Consumer Products
    • Construction
    • Processor of the Year
    • Best Places to Work
    • Women Breaking the Mold
    • Rising Stars
    • Diversity
    • Most Interesting Social Media Accounts in Plastics
  • Opinion
    • The Plastics Blog
    • Kickstart
    • One Good Resin
    • Pellets and Politics
    • All Things Data
    • Viewpoint
    • From Pillar to Post
    • Perspective
    • Mailbag
    • Fake Plastic Trees
  • Shop Floor
    • Blending
    • Compounding
    • Drying
    • Injection Molding
    • Purging
    • Robotics
    • Size Reduction
    • Structural Foam
    • Tooling
    • Training
  • Events
    • K Show Livestream
    • Plastics News Events
    • Industry Events
    • Injection Molding & Design Expo
    • Livestreams/Webinars
    • Editorial Livestreams
    • Ask the Expert
    • Plastics News Events Library
    • Processor of the Year submissions
    • Plastics News Executive Forum
    • Injection Molding & Design Expo
    • Plastics News Caps & Closures
    • Women Breaking the Mold Networking Forum
    • Plastics in Automotive
    • PN Live: Mergers and Acquisitions
    • Polymer Points Live
    • Numbers that Matter Live
    • Plastics in Politics Live
    • Sustainable Plastics Live
    • Plastics Caps & Closures Library
    • Plastics in Healthcare Library
    • Women Breaking the Mold Networking Forum Library
  • Rankings & Data
    • Injection Molders
    • Blow Molders
    • Film Sheet
    • Thermoformers
    • Pipe Profile Tubing
    • Rotomolders
    • Mold/Toolmakers
    • LSR Processors
    • Recyclers
    • Compounders - List
    • Association - List
    • Plastic Lumber - List
    • All
  • Directory
  • Resin Prices
    • Commodity TPs
    • High Temp TPs
    • ETPs
    • Thermosets
    • Recycled Plastics
    • Historic Commodity Thermoplastics
    • Historic High Temp Thermoplastics
    • Historic Engineering Thermoplastics
    • Historic Thermosets
    • Historic Recycled Plastics
  • Custom
    • Sponsored Content
    • LS Mtron Sponsored Content
    • Conair Sponsored Content
    • KraussMaffei Sponsored Content
    • ENGEL Sponsored Content
    • White Papers
    • Classifieds
    • Place an Ad
    • Sign up for Early Classified
MENU
Breadcrumb
  1. Home
  2. News
November 27, 2017 01:00 AM

Hurricanes disrupt resin market, but oil may have long-term impact

Bill Wood
Economics Editor
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    NASA
    A NASA photo of Hurricane Harvey as it made landfall in Texas.

    The holiday season is in full swing, and while most of us already have already started our celebration of the traditional American holidays, I would like to offer one more date we should observe with some manner of festival rites.

    Nov. 30 marks the official end of hurricane season for this year.

    I am pretty sure that the hurricanes we experienced this past season will be remembered for a long time. It is impossible to put an economic value on the personal pain and loss caused by these catastrophic storms; nevertheless, the measurable economic impact was significant. The effects that Harvey, Irma and Maria had on the plastics industry, in particular, became clearer with the recent release of the economic data from August and September.

    Consider the monthly data for U.S. industrial production of plastics materials and resin. This indicator is in the form of a seasonally adjusted index (2012=100), and it is compiled and reported by the Federal Reserve Board.

    You will recall that Hurricane Harvey hit Houston in late August. According to this index, there was a sharp decline in resin production in both August and September. To be more precise, the output of resins decreased by 6 percent in August when compared with the previous year, and for September the decline was 10 percent. This pushed U.S. resin production to the lowest levels since the Great Recession; however, it came at a time when overall U.S. demand for plastics products was expanding at a rate of about 2 percent.

    As one might expect when a market's supply and demand fundamentals are subjected to this kind of shock, there was an increase in the price of resin. According to my Resin Price Index, which I calculate every month using data from the Plastics News resin pricing chart, the volume-weighted average resin price increased about 10 percent when compared with its pre-storm level.

    I will not go too far out on a limb with predictions about what this means for the future trends in production levels and prices. This market is susceptible to a number of unforeseeable factors, both natural and man made. However, the recent price action does offer some clues about the current state of the market, and it makes sense for compounders and processors who use these materials to take advantage of this information whenever possible.

    Jessica Jordan

    The first thing to glean from the data is that there may still be some lingering effects from these hurricanes that will show up in subsequent data reports. Most reports indicate that resin suppliers were able to get back to normal levels of production activity pretty quickly, so we are likely past most of the disruption. But production and shipping levels for resins have probably not totally rebounded to pre-storm levels, so there may yet be some upward pressure on resin prices.

    Second, the fact that resin prices have increased by about 10 percent, and in an orderly manner, when production levels unexpectedly dropped by 10 percent, indicates to me that the supply chain is healthy and still has enough slack to meet future demand. If market conditions had been tight before the storm, then a disruption to supply could have created an outsized response in the market price. But that is not what happened this time.

    The chart shows that resin production dipped from the 100-line at the end of 2014 to the 90-line by the end of 2015. The fact that recent output was consistently running about 10 percent below the average levels from just a couple of years earlier indicates that supply conditions were not tight at the time the hurricanes hit.

    It is worth noting that output levels were in a gradual trend upward, just above the 90-line, when the storms hit. Therefore, I expect that levels will get back up to pre-storm levels in the coming months. But it is not clear when they will rise back to the levels we saw in the period from 2012 through 2014.

    As anyone who follows this market closely will tell you, the relationship between prices and production is fraught with uncertainty. One of the major determinants of output levels in recent years appears to be the price of crude oil.

    My Resin Price Index hit a cyclical peak in the fourth quarter of 2014. It then dropped precipitously through all of 2015 before hitting a cyclical low-point in the first quarter of 2016. The pattern in the chart for resin prices closely corresponded with the pattern in the price for crude oil during that period. And the trend in production levels also followed this pattern.

    You will recall that the global oil market was oversupplied three years ago, and the price of crude oil crashed. Crude oil prices plummeted by approximately 70 percent from late-2014 to early-2016. Resin prices reacted by falling approximately 40 percent. Resin suppliers curtailed production by about 10 percent, apparently in response to the lower prices.

    As we enter 2018, the price of crude oil is currently in a small, but noticeable, trend higher. The same can be said for the trend in resin prices. It remains to be seen how long these trends will be sustained, but I do not expect them to decline from current levels. Resin output will rebound from the lows caused by the storm, but they will not likely rise too much higher than that. I do not yet have a forecast for when and where the next major hurricane will hit.

    RECOMMENDED FOR YOU
    Graham Packaging updates ESG efforts
    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Plastics News would love to hear from you. Email your letter to Editor at [email protected]

    Most Popular
    1
    Biden sets US goal to replace 90% of plastics with biomaterials
    2
    Redline's ‘outrageous cultural behaviors' retain top employees
    3
    Industry sees Biden bioplastics goal as serious signal
    4
    Official says Norfolk Southern fire likely started in rail car containing resin
    5
    Commodity prices rise; engineering resins drop
    SIGN UP FOR OUR FREE NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Get our newsletters

    Staying current is easy with Plastics News delivered straight to your inbox, free of charge.

    Subscribe today

    Subscribe to Plastics News

    Subscribe now
    Connect with Us
    • LinkedIn
    • Facebook
    • Twitter
    • Instagram

    Plastics News covers the business of the global plastics industry. We report news, gather data and deliver timely information that provides our readers with a competitive advantage.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI 48207-2997

    Customer Service:
    877-320-1723

    Resources
    • About
    • Staff
    • Editorial Calendar
    • Media Kit
    • Data Store
    • Digital Edition
    • Custom Content
    • People
    • Contact
    • Careers
    • Sitemap
    Related Crain Publications
    • Sustainable Plastics
    • Rubber News
    • Tire Business
    • Urethanes Technology
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Processor News
        • Injection Molding
        • Blow Molding
        • Film & Sheet
        • Pipe/Profile/Tubing
        • Rotomolding
        • Thermoforming
        • Recycling
      • Suppliers
        • Machinery
        • Materials
        • Molds/Tooling
        • Product news
        • Design
      • More News
        • K Show
        • Mergers & Acquisitions
        • Sustainability
        • Public Policy
        • Material Insights Videos
        • Numbers that Matter
      • Digital Edition
      • End Markets
        • Automotive
        • Packaging
        • Medical
        • Consumer Products
        • Construction
      • Special Reports
        • Processor of the Year
        • Best Places to Work
        • Women Breaking the Mold
        • Rising Stars
        • Diversity
        • Most Interesting Social Media Accounts in Plastics
      • Newsletters
      • Resin pricing news
      • Videos
    • Opinion
      • The Plastics Blog
      • Kickstart
      • One Good Resin
      • Pellets and Politics
      • All Things Data
      • Viewpoint
      • From Pillar to Post
      • Perspective
      • Mailbag
      • Fake Plastic Trees
    • Shop Floor
      • Blending
      • Compounding
      • Drying
      • Injection Molding
      • Purging
      • Robotics
      • Size Reduction
      • Structural Foam
      • Tooling
      • Training
    • Events
      • K Show Livestream
      • Plastics News Events
        • Plastics News Executive Forum
        • Injection Molding & Design Expo
        • Plastics News Caps & Closures
        • Women Breaking the Mold Networking Forum
        • Plastics in Automotive
      • Industry Events
      • Injection Molding & Design Expo
      • Livestreams/Webinars
        • PN Live: Mergers and Acquisitions
      • Editorial Livestreams
        • Polymer Points Live
        • Numbers that Matter Live
        • Plastics in Politics Live
        • Sustainable Plastics Live
      • Ask the Expert
      • Plastics News Events Library
        • Plastics Caps & Closures Library
        • Plastics in Healthcare Library
        • Women Breaking the Mold Networking Forum Library
      • Processor of the Year submissions
    • Rankings & Data
      • Injection Molders
      • Blow Molders
      • Film Sheet
      • Thermoformers
      • Pipe Profile Tubing
      • Rotomolders
      • Mold/Toolmakers
      • LSR Processors
      • Recyclers
      • Compounders - List
      • Association - List
      • Plastic Lumber - List
      • All
    • Directory
    • Resin Prices
      • Commodity TPs
        • Historic Commodity Thermoplastics
      • High Temp TPs
        • Historic High Temp Thermoplastics
      • ETPs
        • Historic Engineering Thermoplastics
      • Thermosets
        • Historic Thermosets
      • Recycled Plastics
        • Historic Recycled Plastics
    • Custom
      • Sponsored Content
      • LS Mtron Sponsored Content
      • Conair Sponsored Content
      • KraussMaffei Sponsored Content
      • ENGEL Sponsored Content
      • White Papers
      • Classifieds
        • Place an Ad
        • Sign up for Early Classified