How Resin Shortages are Impacting the Supply ChainWild Fig Support
Resin production has had its share of ups and downs over the years, but recent events have wreaked even more havoc in an already volatile market. Supply shortages have intensified and prices have continued to rise, while a steady stream of demand persists with occasional strong surges.
As often happens, instability in one part of the market causes ripples that reach the rest of the supply chain. Since we use resin in many of the products we manufacture here at SCS (such as elevator buttons, braille, and signage), the shortages have affected us as well.
New Shortages in an Already Tight Market
By now, we’ve all heard about the massive winter storm that hit the south in February, causing widespread power outages. These storms essentially shut down a region that is a major petrochemical producer, including 80-85% of U.S. polyethylene (PE) and polypropylene (PP) production. Resin supplies were already tight from a series of disruptions over the past several months, so this new disruption really packed a punch. When all is said and done, it’s estimated that more than two billion pounds of resin production will have been lost due to the storms.
Inventories of PP had sunk to the lowest levels in many years even before the storms halted production due to other events over the past year. This additional shock has driven availability even lower and caused resin prices to skyrocket to record levels.
Resins at Their Highest Prices in Years
Resin prices have continued to climb, in some cases increasing as often as twice per day. PE blow mold resin, for instance, gained $0.26/lb in February, for a total increase of $0.42/lb since the start of the year (as of the beginning of March). Spot ethylene is at its highest price since 2014. And PP prices have jumped significantly as well, up a whopping $0.50/lb in February ($0.67/lb since Jan 1). This price volatility has buyers scrambling to scoop up any reasonable offer they can find, and resorting to the unreasonable ones after that.
In a market where prices typically vary by penny increments, nickel and dime increments are becoming common. This, coupled with reduced supply and consistently high demand, is putting a squeeze on profitability for many companies.
The disruptions in U.S. resin production make for a very tight market indeed. Even with thousands of tons of PP coming from overseas, an industry shortfall is still expected in the coming months. New demand for pandemic-related supplies like face masks and syringes (many of which are made with PP) are increasing the resin shortages. And this is the type of essential buying that won’t slow down with price increases.
The Plastics Exchange reports that in their 21 years of supplying resin, they’ve never seen this level of supply/demand imbalance. This crisis has demanded creativity, as some resin buyers have adjusted their technical specifications and packaging requirements, resorting to using whatever materials they can access until market conditions improve.
How This Affects SCS Elevator
Here at SCS Elevator, we use various types of resin in our plastic injection molded elevator cab braille, jamb braille, buttons, signage, and other products. Unfortunately, because of the recent disruptions in production, a Force Majeure event has been called by our supplier on certain resins. (Click here to see the letter we received.)
While we initially thought we would be able to get our open orders in house by mid-March, we were recently informed of some date changes to our orders, pushing them out further. After this, we unfortunately received another notice that things are worse than expected. We currently have no due dates on some of our critical resin.
We’ve been working with our supplier since we first learned of the resin shortages, and we are doing all we can to secure the resins needed to keep supplying your plastic parts. But from what we have heard so far, it does not look promising. We do not have a lot of details right now, but we will continue to communicate the most up to date information about the situation as it evolves.
Finding alternative solutions that are the least disruptive to our customers is our top priority right now. For example, in many cases we may need to discuss temporary deviations in material. At this time we do not know exactly what that alternative material would be or what parts would be affected, but we are continuing to put our best efforts toward finding the best solution for all affected.
If you have questions about how the resin shortages will affect your SCS order, or have concerns about placing orders in this volatile time, please don’t hesitate to contact us. Our customer service team is standing by to help.