The recent acquisition of Chemical Data LLC by ICIS placed a spotlight on an important part of the materials market that's rarely discussed in the open: resin pricing.
CDI, along with IHS Markit, is one of the most widely followed resin pricing indexes. Plastics market players ranging from resin makers to processors to consumer brand owners use the prices reported by these indexes to settle contracts on a monthly basis.
This process avoids lengthy and unproductive haggling over pricing while also providing each side with a fall guy ("Hey, don't blame me…") if they don't agree with what's been reported.
This process also doesn't really exist for any other commodity product that's sold in billions of pounds. Although some have had limited success, plastic resin pricing largely has proven immune to futures contracts and other more transparent methods by which prices are set for commodities. The reasons for this are too complex to cover in a blog post. It's safe to say that resin price indexes still hold considerable influence.
(Plastics News of course reports our own resin prices, which I've compiled for many years. PN always has recommended that anyone using our prices do so in combination with one of the other indexes.)
Someday, I need to record the phone calls I have with people — usually private equity types or other financial folks — who are new to plastics and are trying to figure out how resin pricing is done. It's kind of like having a difficult discussion with a kid about Santa Claus.
Houston-based CDI has been providing its services since 1979. ICIS is a division of London-owned RELX plc, a publicly traded company formerly named Reed Elsevier. The combined company will continue to provide global price benchmark data, market analysis and forecasts for plastics and other petrochemicals.
In a news release, CDI President Jason Brown said that CDI and ICIS are "a perfect fit." He added that combining CDI's deep expertise in the two firms' respective regions "will bring significant benefits to our customers around the world as well as the broader industry." ICIS President and CEO Dean Curtis said in the release that CDI "is widely recognized as a leader in the U.S. petrochemical segment."
The best-known name at CDI is Senior Vice President Brian Pruett, who's been setting CDI's market prices for polyethylene and polypropylene resins — two huge commodities — for many years. Pruett joined CDI in 1995 after more than a decade with plastics and chemicals maker Lyondell, which now is part of LyondellBasell.
If I had $5 for every time a resin maker or processor has mentioned Brian Pruett's name to me in the last 20 years, I'd be writing this from a yacht somewhere. Market players don't always agree with Pruett, but they're very aware of what actions he takes at CDI late every month when the firm's pricing report comes out.
In an online message, Pruett said that it should be business as usual at CDI after the deal with ICIS. Most CDI staff "are staying in place and doing the same product coverage as before," he added.
"The key thing to note with this deal is there will be very little change with CDI reports and services, our product coverage and benchmark prices, or our people," Pruett said. "But the synergies of a new CDI-ICIS sales force and IT departments … will allow CDI to leap forward five to seven years into the future in those areas."
He added that in recent years CDI has strengthened its staff by hiring market veterans Alex Lidback, Kim Haberkost and Josh Dillingham. Pruett described that trio as "three industry rock stars."
That's music to the ears of CDI customers and to new owners ICIS as well.