Since the start of the pandemic, supply chain issues have been felt by nearly every industry, with prices rising as materials become more scarce. Earlier this year, we shared an update on climbing resin prices and concerns about diminishing supply. As we near the end of the year, we thought it would be a good time to check in again to get a sense of how things have changed over the last six months.
Climbing Prices, Increased Production
During the summer, resin prices continued to climb, with polyethylene (PE) prices rising by $0.60/lb compared to 2020. At the start of the third quarter in July, there was another price increase in place, while resin production finally started to get back to more normal levels. This allowed manufacturers to build back up their depleted inventories.
As explained by a summer report from Plastics Today:
“While some force majeure conditions and material allocations remain in place, resin production has returned for the most part, and can even be considered robust. However, after fulfilling contracts, producers are holding back resin to rebuild inventories, leaving little resin available for spot sales.”
Building up their inventories also helped producers prepare for potential disruptions during the height of hurricane season.
A Sign of Stability Ahead?
That preparation has paid off, with reports in recent weeks showing that relief is ahead. While there were some production issues caused by Hurricanes Ida and Nicholas, they weren’t significant because of the conscious effort to build up inventories during the summer.
So, what is the state of the resin market now? In late September, Plastics Today reported decreases in resin prices and no issues with supply disruptions. That trend continues with their latest report from mid-October, when PE prices dropped 2-3 cents and polypropylene (PP) prices dropped by at least a nickel. As a result, there’s better demand and stronger completed volumes available.
The report goes on to state:
“While it is entirely possible that October PE contracts roll steady once again, an official price decrease could also be warranted after such a long series of increases and considering that discounted domestic shipments have now become more prevalent, according to the PlasticsExchange.”
While it’s encouraging that the domestic prices are beginning to trend favorably, international prices for both PE and PP continue to face pressures, so imported products are also still experiencing upward pricing pressures.
We’ll continue to monitor future reports and post updates here on our site.