A U.S. rail strike, which could take as early as Dec. 5, could threaten the nation’s plastic resin shipments.
An executive at a U.S.-based resin distributor said a strike would impact 30 percent of rail traffic, so the effect on plastics markets “would be significant,” since most resin moves to market by rail. But he added that the impact “could be muted somewhat” by softening demand and high inventories in the supply chain. Trucking capacity also has eased, the executive said.
Market veteran Esteban Sagel had one word to describe the potential impact: Chaos.
“Our industry is highly dependent on rail…[so] it may be a reprise of what we saw earlier this year,” said Sagel, principal at Chemical & Polymer Market Consultants in Houston. “Difficulties to ship material domestically or for export may force producers to decrease operating rates — which they are already doing — and push for price increases to dissuade demand.”
A rail strike “would be problematic under the best of circumstances,” said Phil Karig, principal at Mathelin Bay Associates in St. Louis. “Compounding the potential effects of a strike are resin producer efforts to curtail production and reduce inventory levels, as well as delays for new polyethylene [resin] capacity.”
The addition of rising diesel fuel prices and limited truck availability could send spot resin prices higher, Karig added.
Possible offsets to a strike impact could be processors running down their year-end inventories and a mandated delay of several weeks for railroads and union holdouts to reach agreement, Karig said.
“Unfortunately, even a brief strike could delay rail shipments of resin across the country for two weeks or more for many processors,” he added, “It could cause bottlenecks in the rail supply chain for longer if rail cars are improperly positioned around the country to meet resurgent demand.”
Members of a one of the nation’s largest railroad unions said Nov. 21 that it had narrowly voted down a tentative contract. The SMART Transportation division, the largest railway union that was voting on the tentative agreement, has more than 37,000 members.