Plastic resins face supply crunch as prices skyrocket amid COVID-19

- Advertisement -


Plastic resins – the tiny plastic shrapnel used to make everything from bread bags to milk containers – are undergoing the triple wham of high demand, tight supply and rising prices.

- Advertisement -

The raw material that forms the basis of all plastics is emerging as the tiniest example of how COVID-19 is creating sustainable supply chain turmoil.

Industry experts say the ongoing shortage of the ubiquitous material is unlikely to be resolved quickly, and rising plastic resin prices are trickling down to consumer goods and driving up inflation.

advertisement

“The situation is very challenging,” said Bob Masterson, president and CEO of the Chemistry Industry Association of Canada, which represents the plastics industry. “These are prices the market has never seen.”

Story continues below ad

- Advertisement -

It began at the start of the pandemic with a huge increase in demand for personal protective equipment such as masks, face shields, gloves and gowns – most of which are made from single-use plastics.

The health crisis also changed consumer shopping habits. Grocery stores fueled the demand for plastic—even toilet paper wrapped in plastic—while grocers made their way to wrap or bag food for both in-store and online purchases. Increased use of plastics.

In addition, shifting food dollars away from restaurants — which buy food in large bulk containers — plastic packaging is also more widely used in grocery stores.

At home improvement stores, as the price of lumber soared, some shoppers turned to materials made from plastic, such as composite decking or plastic sheds.

COVID-19 led to a significant expansion in demand for plastic products across a range of market segments,” Masterson said, noting that by the end of 2020, plastics production and consumption reached record levels in North America.

Yet as demand peaked, supply declined.

Story continues below ad

Many plastic resin manufacturers postponed maintenance of their facilities at the start of the pandemic, but Masterson said the activity could not be further delayed. He said many facilities are currently offline for maintenance.

It comes after a year of severe weather events along the US Gulf Coast that have left many chemical plants dormant for weeks. Masterson said Hurricane Ida is the most recent storm to shake the industry and create more challenging conditions in the short term.

At the same time, the construction of new facilities slowed down. For example, Inter Pipeline Ltd said in May 2020 that the pandemic had affected near-term construction plans on the $4 billion Heartland petrochemical complex near Edmonton. The Thdigitlae facility will convert propane to polypropylene, a material used in a range of products such as medical supplies and lightweight automotive parts.

Tight supply coupled with ongoing strong demand has sent plastic resin prices through the roof.

“Within the first year of the pandemic, the price of our raw materials had increased by 107 percent,” says Joel Rudolph, chief operating officer at Farnell Packaging Ltd. The company near Halifax uses plastic pellets to make flexible packaging used primarily in food. industry.

“We have seen almost two years of phenomenal growth now. We have had some really tough months.”

Story continues below ad

Still, the cost of plastic packaging on food items is only a small fraction of the total cost consumers pay, which means higher plastic prices should not cause sticker shock to shoppers, he said.

“At the cost of bread, the cost of plastic bags is a very small percentage of the total cost,” Rudolph said.

Yet experts say plastic prices are just one of many factors driving up the cost of the material and contributing to rising inflation.

Statistics Canada said the annual pace of inflation last month rose to 3.7 percent in July, the biggest increase since May 2011. The price of so-called durable goods, which includes many items made of plastic, rose at a rapid rate of five percent.

Story continues below ad

Indeed, the rising cost of plastic resins was cited in Canadian Tire Corp’s recent earnings call as one of the inputs creating “inflationary pressure” on the retailer.

“We may have seen commodity cost pressures in products made from plastic resin such as storage containers,” TJ Flood, president of the Canadian tire retail chain, said during the company’s second-quarter conference call with analysts last month.

Industry experts say the ongoing shortage of the ubiquitous material is unlikely to be resolved quickly, and rising plastic resin prices are trickling down to consumer goods and driving up inflation.

Toymaker and children’s entertainment company Spin Master Corp. also discussed rising plastic resin prices during its latest earnings call.

“We’re seeing an increase in input costs primarily from plastic resin, paper and cardboard packaging and more recently electronic chips, and especially from sea freight,” Mark Segal, Spin Master’s executive vice president of chief financial office, told analysts in August. “

Canadian Tire and Spin Master both declined to comment further on plastic resin prices.

While the situation isn’t likely to be resolved anytime soon, Masterson said it should begin to ease as the backlog of demand fills up and new features come online.

Inter Pipeline said its plastics facility is expected to begin manufacturing polypropylene in early 2022.

advertisement

- Advertisement -
Mail Us For  DMCA / Credit  Notice

Recent Articles

Stay on top - Get the daily news in your inbox

Related Stories