Challenges facing the North American resin market don't appear to be going away anytime soon, according to a pair of executives with resin distributor Amco Polymers.
"It feels like the hangover from COVID-19 and Winter Storm Uri is continuing," Commodities Product Director Bruce Flannery said on an Aug. 3 webinar hosted by the Manufacturers Association for Plastics Processors.
"North American [resin] demand is at an all-time high, but logistics are in crisis," he added. "There are challenges in logistics, supply and demand, labor and inflation."
The entire resin value chain is being impacted by a lack of inventory and strong demand, according to Jeff Schultz, engineering thermoplastics product director with Orlando, Fla.-based Amco.
"Producers are shipping from production, not from inventory," Schultz said. "Many producers are still under force majeure or sales allocation. [Resin] plants are operational, but not optimal."
And although inflation is rising, he added that inflation "has yet to impact demand."
U.S. auto production is ahead of 2020's pace, but behind that of 2019. As a result, new car inventories are almost 60 percent lower than they were at this time in 2020 and 70 percent behind levels of 2019.
The building and construction market also has created resin demand, with housing starts up 30 percent vs. last year. Consumer spending on durables also has seen "a sustained increase," Schultz said.
New workplace safety protocols and schedule changes because of employees with COVID-19 have affected production throughout the supply chain, according to Flannery. "Rehiring and training of staff are big challenges," he said.
Shipping also has been affected by COVID-related shutdowns of overseas ports. And record import volume at U.S. ports is causing major backlogs, with larger-capacity vessels now needing four to five days to unload instead of one to two days normally needed.
Truck drivers also are in short supply, and driving schools for new drivers haven't been able to fully operate because of the pandemic, Flannery added.
"You need three weeks or more to source a truck, and then you're paying two to three times regular rates," he said. "Six orders need [to be] shipped for every available truck that's on the road."
And although there's been some recent talk that the Chinese economy may be cooling, which would reduce global demand, Schultz said. "It could be some time until we feel the effects of that in our market."
Among resin markets, Flannery said that North American polyethylene has been affected by "uneven restarts and delayed turnarounds" since Winter Storm Uri hit Texas in February, knocking out most resin production for several days.
"It feels better that these [PE] plants are up and running, but demand has prevented restocking," he added. "Resins used in durables are struggling with hyper demand."
The three-month period of April, May and June 2021 were the highest three months of PE sales on record, according to Flannery. He added that supplies of high density PE for injection molding and blow molding especially were in short supply. "There's no reason for a [PE] price decrease at this time," he said.
New PE capacity in 2022 from Shell Polymers, ExxonMobil/Sabic and Nova Chemicals should improve the North American supply situation.
In the polypropylene market, domestic supplies are expected to be tight through 2022, according to Flannery.
"Finished [PP] goods can't replace domestic supply because of logistics," he said. "[PP] producers are making money, so they're highly incentivized to run full out. Capacity should be sold out for the foreseeable future."
The regional polystyrene market has seen some recent price corrections, but Flannery said that market "could be looking at price increases again."
In engineering resins, Schultz offered a similar high demand/tight supply description for several materials, including polycarbonate, ABS, nylons 6 and 6/6, polybutylene terephthalate, acetal and thermoplastic polyurethane.
"Nylon 6 is tight but improving," he said. "It's in better shape than 6/6, but there's also a shortage of glass fiber and additives."
Schultz said that customers who can convert applications from nylon 6/6 to nylon 6 or other resins "should be in evaluation." He added that general purpose or unfilled grades of PC and PBT are available before alloys or glass-filled and flame retardant grades.
Amco has responded to the crisis by doubling the size of its purchasing department in the last six months. "It's become very difficult to keep track of orders," Schultz said. "We needed more people."
Flannery and Schultz offered several action steps that plastics processors can take to make it through the current resin supply crisis. Those steps include:
• Working with suppliers to confirm allocations and future supplies.
• Talking about credit availability.
• Qualifying alternate resins and getting more resin approvals.
• Working with authorized distributors who have contracts and assurance of supply with resin makers.
• Being ready to give long-term commitments.
• Placing purchase orders as far out as possible and being ready to place a purchase order for spot material if an opportunity presents itself.
• Giving a two- to three-day delivery window instead of a firm delivery date.
• Scheduling bulk truck deliveries at least three weeks in advance.
