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March 05, 2020 10:11 AM

ICIS: Virus risk likely ‘minimal' overall, but conditions ‘fluid'

Frank Esposito
Senior Staff Reporter
Plastics News Staff
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    Lanxess AG

    Lanxess AG donated 1 ton of its Rely+On Virkon disinfectant to some hospitals in Wuhan, China, and surrounding cities. The donation arrived at a Lanxess warehouse in China in mid-February. The banner says: "Lanxess supports Wuhan."

    Plastics industry consultants say they expect the coronavirus outbreak to have little impact on the overall global materials market, but they warn that the economic hit from COVID-19 remains unpredictable.

    James Ray, consulting vice president for ICIS in Houston, said that the risk of a major pandemic "is very low, leaving a high probability that the COVID-19 virus impact on plastic demand will be minimal and/or only temporary."

    Market veteran Esteban Sagel added that the impact of the coronavirus "is a very fluid situation and very hard to evaluate."

    "If we narrow our focus on China, the decreased economic activity should result in lower imports of polymers and potential increases in inventories at local producers," he said in an email. "Decreased imports would increase competitive pressure and potentially lower prices in alternative exporting regions."

    Increased inventories due to reduced domestic demand "would also have a depressing impact" on prices in China, added Sagel, principal of Chemical and Polymer Market Consultants in Houston. "For how long and how deep those depressed prices stand will depend on the time it takes to evolve from the current global panic to a situation where the virus is under control."

    Phil Karig, managing director of Mathelin Bay Associates in St. Louis, said that given China’s role as one of the world’s largest plastic consumers and the dependence of many U.S. resin makers on export markets, any disruption in Chinese resin consumption “is bound to ripple through world resin markets and eventually impact the U.S.”

    “The good news is that much of the production that was curtailed in China is starting to come back on line and absent any major flare-up in virus cases, Chinese resin demand should soon start to ramp up again,” he added in an email.

    Karig also said that in the wake of the coronavirus, there are likely to be short-term demand increases or decreases for some products in the U.S., such as PET resin. Demand for that material “is bound to spike upwards” for at least a short time as consumers stock up on extra water bottles, he added

    High density polyethylene resin demand should see some rise as consumers buy more cleaning and disinfecting products. On the negative side, according to Karig, there may be a short-term reduction in demand for products such as plastic to-go drink cups and lids as some consumers “think twice about visiting their local coffee shops for a while."

    Another key area to watch, Karig said, is what happens to demand for durable products if fear of the virus continues to negatively impact consumer sentiment. 

    Donations continue

    To help battle a further spread of the disease, Lanxess AG has joined other global materials suppliers in donating products that will help with emergency response.

    Cologne, Germany-based Lanxess, donated 1 ton of Rely+On Virkon, a powder disinfectant that can be diluted into 100,000 liters of solution, officials said. They added that the disinfectant has proven effective against coronavirus.

    The donated disinfectant was made at a Lanxess plant in Sudbury, England, and arrived at Chinese hospitals on Feb. 16.

    "LANXES feels deeply connected to the people in China, not least because of our 1,200 employees and eight production sites in the country," Material Protection Products head Michael Schäfer said in a news release. "With our disinfectant Rely+On Virkon, we can effectively help to contain the epidemic."

    Rely+On Virkon is diluted for application and sprayed on hard surfaces and equipment. Officials said it can help to reduce the risk of contamination of surfaces, door handles, tables or chairs during disinfection measures in hospitals, public transport terminals, airports, shopping malls and similar places.

    A Lanxess spokesperson said in an email that the firm's local headquarters in Shanghai and production sites throughout the country had been temporarily closed but had restarted production as of March 3. The spokesperson added that Lanxess will share an update on the operational effects of the coronavirus during its year-end 2019 earnings announcement on March 11.

    Plastics-related products made by Lanxess include specialty nylon resins, PBT, polyurethanes, composites and plastic additives.

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