A ‘landscape of uncertainty' for materials markets in 2022

Even with strong demand growth, resin makers and plastics processors are in "a landscape of uncertainty" in 2022.

That was the term used by market veteran Andrew Reynolds on a recent industry update webinar hosted by M. Holland Co., a leading materials distributor based in Northbrook, Ill.

North American polymers markets saw "significant growth" in 2021, with overall value growing 25-30 percent due in part to volume growth and raw material inflation, according to Reynolds, director with Business Publishing International Ltd. in Bristol, England.

"All end uses were good except automotive," he said. "Construction was up because people stayed home, and packaging benefited from strong consumer support. Markets were remarkably resilient in light of challenges."

Future growth could be aided by government spending on infrastructure such as pipe and cable and reshoring of work in medical and pharmaceuticals, Reynolds added. But challenges to plastics markets are being presented by supply issues, rising costs and inflation.

"Supply issues could continue in 2022 and maybe beyond," he said. "And future outlooks are being affected by political and trade turmoil."

Getting back on the positive side, Reynolds said that demand for both virgin and recycled resins is expected to grow looking forward to 2030. Growth rates for virgin materials should be in low single digits, with recycled demand growing at double-digit rates.

"The image of plastics also will be a challenge," Reynolds said. "You need a strategic relationship with your suppliers."

The materials market finally appears to be over the impacts of Winter Storm Uri, which froze Texas and affected much resin production in February 2021. Uri "was a four-day freeze that lasted about 12 months," according to Nate Buza, polyolefins marketing director with resin maker LyondellBasell Industries in Houston. "It showed how interconnected the industry is.

"If more plants would have proactively shut down, it would have reduced the impact. But the cost of insulation outweighs what anyone wants to pay, so now we all have cold weather plans just like hurricane plans," he said.

"We've seen things improve in the last eight to 10 months," he added. "But we're not out of the woods yet with additives, raw materials or shipping."

Availability of engineering resins is improving, according to Jen Riley-Brady, international vice president for M. Holland, but issues such as shipping and fuel surcharges continue to affect materials markets.

Andy VanPutte, senior supply chain director for Jabil Packaging Solutions in Greenville, S.C., added that overall material availability is improving, but the market still has "pockets of trouble." Jabil's health care unit ranks among North America's 10 largest injection molders, according to Plastics News data.

"Some engineering resins are still short, especially compounds with additives," he said.

VanPutte added that the Ukraine crisis has had an impact on energy markets. "Oil and gas can affect every polymer in the pyramid," he said.

Shipping backlogs also have filled warehouses at the Port of Houston with resin to be exported, according to LyondellBasell's Buza.

"We have resin that's been sold but needs to be cleared," he said.

"There's been a lot or resourcing and reassessment in the last two years," BPI's Reynolds added. "Processors have to think of where their materials are coming from.

"There are a lot of moving parts and you don't want your materials to have a long journey. Events in one part of the world can affect processors in North America," he said. "It becomes a question of when do the economics of making something cheaply kick in. A processor said to me 'If we have 95 percent of what we need, but but can't get the other 5 percent, we can't make the product.'"

Jabil's VanPutte summed up the situation by saying "If you're building and you miss one component, you're dead."

"Companies are reconsidering the weakness of the supply chain and looking at alternate materials or alternate suppliers," he said. "They're trying to relocalize supply to where the end market is."

Other constraints in shipping and packaging include everything from pallets to boxes, M. Holland's Riley-Brady added. "It's more of a domino effect," she said.

The last two years in general have had "too many impacts in too short a period of time" for materials markets, according to VanPutte. "One impact would have been OK, but all together they exposed weaknesses."

"Buyers and sellers had to change their behavior. They had to have more inventory, order in advance and don't change their orders. I don't think it will go back to the way it was completely."

Reynolds added that plastics firms "are doing the easy reshoring, but difficult reshoring takes years to achieve."

Labor availability also continues to be a challenge for many firms. "There's trouble at all levels," VanPutte said. "Operations in the factory, technical skills, the professional ranks. … People are looking at where they want to work and who they want to work for and it's not over yet. It's changing how we look at the work force."

"There are a lot of people who are new, but also a lot of people who are ready to retire," Buza said. "You can't replace 30-40 years of experience." He added that 15 percent seems to be the average amount LyondellBasell's customers are short on labor at any given time.

One area that's benefited amid the challenges of the last two years has been sustainability.

"We've made more progress on sustainability in the last 16-18 months than we did in 16-18 years," Buza said. "The industry has been the target of anti-plastic rhetoric, and demand for recycled content now is more than we can supply.

"We have to be proactive so we don't get regulated into something," he added.