The price of plastic
As with every industry around the world, the plastics industry is feeling the effects of a turbulent economy. With prices rising around every corner and shortages hitting across the globe, it seems that each month brings something new to our industry. Looking at the bigger picture, it isn’t just plastic. Many raw materials are either in short supply, are soaring in price, or in some cases…both! The past 12 months have thrown a lot of things our way. What is actually going on?
The world around us
Covid-19 has been a major catalyst of supply chain disruptions across the globe – an event which no one could’ve predicted. With lockdowns emerging worldwide, businesses shutting, people being told to stay home, warehouses and offices empty, the world truly came to a standstill. This meant that raw materials weren’t getting produced, so when a company needed them to make products, they couldn’t get them.
Brexit has been another big catalyst for change. Although the UK left the EU in January 2020, nothing took place until December 2020 while the UK was in ‘transition period’, with January 2021 being the real time the UK saw any changes and felt any effect of leaving the EU. Brexit has led to European workers struggling to be legally allowed to work in the UK, which again has slowed the supply chain.
Following on from a skilled worker shortage, in September last year, the UK suffered a fuel crisis due to a shortage of HGV drivers. I’m sure we all remember queueing for nearly an hour to have a £30 limit put on our tanks. This fuel crisis was yet another blow to our supply chains, in some instances halting the movement of raw materials.
Although we seem to be learning to live in a post-Covid world, the epicentre of the Covid-19 pandemic, China, is still struggling to this day. China’s zero Covid policy has seen some cities and regions put into week-long lockdowns, even though they’ve had fewer than 100 cases. Whilst we see what they are trying to achieve, this means factories are shutting at a moment’s notice and whole industries are being disturbed in the blink of an eye.
This uncertainty in China has led to many industries being slowed down. One major shortage for 2022 has been the global microchip shortage, which could go on for the rest of the year and into 2023 and beyond. The automotive industry in particular has been hit hard by the chip shortage. Partnered with metal and energy prices increasing and a post-pandemic supply chain has caused issues.
Prices rising at every turn
The post-covid bounce, discussed above, in combination with a plethora of production issues at major manufacturers meant that 2021 was littered with supply shortages for many materials and additives. Prices of all commodities and specialist materials rocketed almost without respite. Early forecasts suggested some price stability from mid-year 2021. It never came. A similar forecast for a plateau in the last quarter was then dashed by steep increases in energy costs.
These increases in energy prices have further hit many businesses as well as homes. In December 2021, we saw gas and electricity prices skyrocket to an all-time high, making most processes more expensive for multiple industries. This has been further exacerbated by the Russian invasion of Ukraine in early 2022. Our polymer suppliers have been particularly badly hit by the spike in both their raw material and energy costs and they have been quick to pass these on.
The last three months have seen prices continue upward, mainly pushed by increased energy costs. Energy consumption in polymer production varies significantly from polymer to polymer and therefore the movements in individual materials have varied widely. This has pushed the price on most polymers to new record highs, especially those for PVC, ABS and polystyrene.
When will the tide turn?
The combination of supply shortages, global events, and strong demand has seen prices increase rapidly and continually throughout the last two years. On many occasions over that time, we have consulted our crystal ball and predicted the market’s performance, only to be confounded once again by another event.
The future for material prices remains unpredictable but it does now appear that declining demand may become one of the strongest drivers in the short term. The uncertainty surrounding a potential economic downturn is expected to have a dampening effect on polymer prices. None of us want to see a recession but weaker demand may have at least some positive effect. Nevertheless, given all of the issues on the supply side, softening demand may not cause polymer prices to fall quickly but it may hopefully bring an end to the constant increases. Some price stability would be a welcome change at least!
We won’t let all of this affect your extrusion needs!
Through careful stock management and close attention to market conditions we want to maintain some semblance of stability and reassurance within our industry. The team here at Condale Plastics will always try to get you the best solution to suit your needs, at the best price possible and within the shortest time. Get in touch with one of the Condale team today and see how we can help you through these tricky times.