Reshoring a bright spot for US plastics industry

Global resin markets are improving but still face a good number of challenges.

These topics were in focus during a recent webinar hosted by M. Holland Co., a major resin distributor based in Northbrook, Ill.

"We're in a unique situation because there aren't many fiscal levers to pull to affect the economy," Executive Vice President Dwight Morgan said during the webinar. "Part of the problem was that the economy wasn't totally recovered from the Great Recession [of 2007-08] when the pandemic hit."

Money supply has created demand, he added, with U.S. core inflation for September up 8.2 percent from the prior year.

"Inflation is becoming wildfire," Morgan said.

The U.S. Federal Reserve has raised interest rates to try to fight inflation. Rates began the year at 0-0.25 percent but by September had been increased to 3-3.25 percent. Morgan said the Fed could raise rates to 4.5 percent before easing.

On the retail and wholesale side, Morgan said high inventories had created a gap of almost 20 percent between inventory growth and sales. Many firms had overbuilt their inventories because of recent supply constraints, he added.

One positive for the U.S. economy has been reshoring of manufacturing work being done to protect supply chains. Morgan said reshoring has brought 350,000 jobs back to the United States.

Morgan also cited data from consulting firm AMI showing that North American resin demand is expected to grow almost 2 percent per year between 2021 and 2025. During that time, on an annual basis, Chinese resin demand is set to grow more than 3 percent, with Asian resin demand (outside of China and India) growing almost 2 percent, while European resin demand is expected to decline just over 1 percent.

Within North America from 2022-25, total polyethylene demand is set to grow 7 percent, with demand for polypropylene and PVC each up almost 10 percent and PET demand up almost 2 percent.

On the webinar, shipping executive Michael Anderson said that "overoptimism in the recovery period" has led to higher inventory levels. Anderson is the automotive and industrial sales head for global shipping firm Maersk.

"There are full warehouses and too much inventory," Anderson said, adding that the trucking and shipping industries are being affected by labor shortages.

M. Holland Distribution Sourcing Director Mike Foldvary said that many companies "got caught flat-footed by how quickly demand went down and now are sitting on inventory."

He added that with 5 billion pounds of new PE capacity being added in North America through early 2023, and with 3 billion pounds of PP capacity added since 2021, the market is facing "a potential glut" for those materials.

Manufacturers also have added sources to help protect their supply chains.

"I haven't seen as many dual sources as I've seen in the last several months," Maersk's Anderson said. "It will be interesting to see as the market evolves how long a memory everyone has.

"They want continuity of supply first and foremost," he added.

Earlier this year, M. Holland added Purell-brand specialty health care resins from LyondellBasell Industries and 3D printing filaments from Braskem SA to its line card.

Officials said the partnership with LyondellBasell "will boost medical packaging manufacturers' access to medical-grade resins and help ensure regulatory confidence for OEMs."

They added the Braskem deal gives their 3D printing clients access to polyethylene and glass-fiber-reinforced polypropylene filaments, both of which deliver high printability and reduced warpage and shrinkage.

M. Holland is one of North America's largest resin distributors, selling more than $1 billion in materials to more than 4,000 customers annually.