PE and PP markets appear poised for a correction

From “Lower prices ahead for PE, PP resins as supplies improve” (Plastics News):

After more than a year of increases, prices for polyethylene and polypropylene resins are expected to trend downward. Market analysts Nick Vafiadis and Joel Morales of IHS Markit gave their outlooks for PE and PP markets Oct. 27 as part of the online Global Plastics Summit 2021.”

Vafiadis said that COVID-19 and “epic weather events” have constrained production of PE resin and delayed new capacity from coming on. Those conditions have led to higher prices since early 2020, but the market “now appears poised for a correction,” he added.

[…] In North America, about 9 billion pounds in PE capacity expansions are expected in the near future. Most recently, Gulf Coast Capital Ventures — a joint venture between ExxonMobil and Sabic — added almost 3 billion pounds of capacity in Corpus Christi, Texas.

Global PE operating rates are expected to range from the low to high 80s in the near term. Global oversupply was expected to be around 24 billion pounds before the pandemic, but now is projected to be less than 14 billion pounds.

The net result of these moves is expected to be lower PE resin prices. “Prices have peaked and are ready to decline because of new capacity and the resolution of storm outages,” Vafiadis said. “They’ll be mitigated somewhat by higher energy prices, but [PE] prices are at or near cyclical peaks in all regions.”

Auto partnership wants new plastic exterior parts

From “Plastics bring solutions in auto lighting, exteriors for autonomous cars”:

The automotive industry needs new concepts to meet optical and physical requirements for exterior parts, as signaling and communication become important aspects for a move toward automated driving.

Auto suppliers Marelli and Samvardhana Motherson Automotive Systems Group have formed a new partnership to integrate sensors for advanced driver-assistance systems and autonomous driving in illuminated exterior body parts like front grilles, bumpers and others.

The partnership plans to create translucent, back-lit trim parts and other decorative panels, with LED lighting shining through them at night and taking on the color of the car body in daylight, both partners told Plastics News in a joint statement.

“Parts like front or rear ends, fenders and rocker panels will evolve into smart illuminated body panels that will give vehicles an even stronger brand signature,” the joint statement said. “Smart illumination opens new possibilities for OEMs to support diversification of brands and models, also with possible different day and night styles.

While the companies work together to develop parts like bumper fascias, which aren’t commonly translucent, out of optical materials, they will also have to meet safety requirements and integrate sensors, like LiDARs, radars and cameras, as autonomous driving systems become required features.

“It is becoming more and more important for the authorities to set rules on how to make fully automated cars recognizable,” the statement said. “Future illuminated parts offer new openings for this purpose and can be used for communication as well.”

Bloomberg columnist and professor of economics at George Mason University on the supply chain breakdown:

…some key nerve centers of the world economy have been hit by a mix of Covid and bad luck, especially in the latter part of this year. Transportation, energy and high-quality semiconductor chips all are experiencing big problems at the same time, for reasons which are distinct yet broadly related.

Start with transportation. While some Chinese ports have been dormant or operating at reduced capacity because of Covid, that is hardly the only issue. A robust trade in durable goods has placed great strain on containers, ships and port operations around the world. The price of containers has skyrocketed, and can be more than 10 times higher than it was just two years ago. In short, a lot of international trade has slowed considerably, plus some of it no longer is profitable.

In some cases, transport-related services are being rationed, as prices are being kept down — maybe to avoid alienating loyal buyers, or maybe because the sellers are not sure if the current demand shocks are permanent. Again, the net result is that a lot of trade simply isn’t happening in a timely manner. […]

Furthermore, a lot of port activity and related local transportation is labor-intensive. Many parts of the world are facing labor shortages, as people are not sure how to reconfigure their post-Covid work futures, or in some cases government benefits may be keeping them from working. That adds further delays to trade networks. […]

So on one side of the equation are trade delays, input delays, higher trade and transport costs, much higher energy prices and chip shortages. On the other side are American and European consumers, who saved enormous amounts of money during 2020 and early 2021 and are now spending it. This combination has fueled price inflation. The demand is hitting the market, and the supply can’t catch up. And it’s not just one problem that has an easy, direct fix, but rather a series of interlocking paths of economic chaos and delay.

https://www.bloomberg.com/opinion/articles/2021-10-11/supply-chain-disruptions-almost-too-many-reasons-to-count

Estimated 10 billion pounds of PE production shut down in the Gulf Coast

From “Resin markets may feel wrath of Ida while recovering from past weather blasts” (Plastics News):

The Gulf Coast of Louisiana is home to many plants making plastic resins, as well as feedstocks needed to make those materials. Most of those plants began to close Aug. 28 in advance of the storm. As of mid-day Aug. 30, no major damage had been reported from any plastics or petrochemicals plants in the region.

But no firms had released a timetable for a potential restart.  Electrical power remains out throughout the region, with almost 1 million people without power. Many roads and rail lines also can’t be used because of high water levels. […]

The Resin Technology Inc. consulting firm in Fort Worth, Texas, estimated that 10.3 billion pounds of annual PE production has been shut down. That production is operated by Dow Inc. in Taft and Plaquemine and by ExxonMobil Chemical in Baton Rouge.

RTI also estimated that 7.4 billion pounds of annual PVC resin production operated by Shintech Inc. in Plaquemine and Addis, Formosa Plastics Corp. USA in Baton Rouge and Westlake Chemical Corp. in Plaquemine and Geismar also are shut down.

The region also is home to several polystyrene production sites, as well as sites making elastomers, polyurethane feedstocks and other materials. Refineries that make propylene monomer as a byproduct of gasoline production also are in the area. Some of that propylene then is used to make polypropylene resin.

As a result, resin prices that buyers had hoped to see leveling out after 18 months of steady increases could be heading up again — an unwelcome event for plastics processors throughout North America.

https://www.plasticsnews.com/news/resin-markets-may-feel-wrath-ida-while-recovering-past-weather-blasts

Consolidation’s big impact on the rotomolding sector

From Consolidation has the biggest impact on rotomolding sector (Plastics News):

With combined sales of more than $2.6 billion for fiscal 2020, 107 firms made the ranking this year. That’s up 3.5 percent vs. 2019. The average sales per company was $23.9 million, that’s up 10 percent.

Proprietary molding makes up the biggest share among the molder, with $1.5 billion, or 60 percent of the total. Custom and captive come in at $605 million and $128 million, respectively.

You may have noticed that we have fewer firms ranked this year and we can look to consolidation for the reason. Tank Holding Corp., which tops our list with estimated $420 million in related sales, includes four acquired companies from our previous list: Dura-Cast Products Inc.; Rotational Molding Inc.; Rotational Molding of Utah and Spin Products Inc.

Myers Industries Inc., enters our list this year at No. 4, with $164.3 million, combining previously listed Ameri-Kart Corp. plus recently acquired Elkhart Plastics Inc. and Trilogy Plastics Inc.

Pacific Supply Chain Updates

Bloomberg reports:

…all inbound and outbound container services at the Meishan terminal in China’s Ningbo-Zhoushan port were halted Wednesday until further notice due to what was described as a “system disruption.” The local government said an employee tested positive for coronavirus. […] Even short suspensions in services at major ports like Ningbo can have wider effects on delivery times and transport costs.

The number of anchored container ships waiting to enter the twin ports of Los Angeles and Long Beach stood at 31 as of Tuesday, more than triple the number in late June. 

Meanwhile, the spot rate for a 40-foot container from Shanghai to L.A. stayed near a record high this week, at $10,322,  according to the Drewry World Container Index published Thursday.

https://www.bloomberg.com/news/newsletters/2021-08-13/supply-chain-latest-china-port-problems-flare-anew

Cargo-handling robots from three US companies

From “The last pieces of warehouse automation will soon be in place” (The Economist):

The robotics division of Honeywell, a large American technology company, has come up with a vehicle-sized unit that fits onto the back of a lorry. It has a large arm fitted with suction cups which can pick up several boxes at a time and then feed them onto a conveyor belt, or knock down a wall of boxes and sweep them onto the conveyor. An individual human worker can unload between 600 and 1,200 boxes an hour. Honeywell hopes that, once its robot is perfected, a single crew chief will be able to supervise the simultaneous unloading of three or four lorries, each at rates of up to 1,500 boxes an hour.

[…]

In Massachusetts, a firm called Boston Dynamics takes a different approach from Honeywell’s. Boston Dynamics is famous in the wider world for an acrobatic humanoid robot called Atlas, and for Spot, a robot that resembles a dog and is now on sale as a device for monitoring what is happening in factories and other large spaces. The firm’s good-handling system, Stretch, is, however, the first it has custom-built for a particular task.

Stretch is smaller and more mobile than Honeywell’s robot, and is able, according to Kevin Blankespoor, Boston Dynamics’ general manager of warehouse robotics, to move easily from one lorry to another, or to a different part of a site altogether. It sports a single arm festooned with sensors and a suction gripper able to handle boxes weighing up to about 25kg. Unlike Honeywell’s system, Stretch can already manage the trick of examining a wall of boxes, working out their sizes and shapes, and choosing which to pick up first. It is, though, slower. The aim is that it will be able to handle 800 cases an hour.

A third contender, Dill, is made by the Pickle Robot Company, also based in Massachusetts. Andrew Meyer, Pickle’s boss, believes Dill has an edge over the competition because Pickle’s engineers have focused on the robot’s ability to handle messy trailers with irregular loads. This is not just a matter of machine vision and an ability to work out where boxes are, but also of understanding the laws of physics, and therefore how particular objects will behave. That helps Dill decide which is the best box to pick up next, and how to deal with it as speedily as possible without dropping it.

In particular, Dill is designed for what Mr Meyer terms “centaur operation”, in which human and robot collaborate, rather than the human’s role being merely supervisory. Dill is skilled at spotting problems it cannot deal with and then calling in human assistance. It can handle 98% of cases on its own, Mr Meyer claims—though it has problems with things like damaged goods and unexpected objects. The upshot is an arrangement which, he says, has a maximum capacity of 1,600 packages an hour, with a realistic average of 1,000.

The next task, which all three companies are now engaged in, is to run the unloading process in reverse by using robots to load lorries in the first place. Besides simply lugging boxes around, this also involves working out how to stack them efficiently.

https://www.economist.com/science-and-technology/2021/08/04/robots-are-poised-to-start-unloading-lorries/21803299

Why Trilogy Plastics was acquired by Myers Industries Inc.

From “Myers plans network of rotomolding plants” (Plastics News):

A potential capital gains tax increase was the “tipping point” for Stephen Osborn’s decision to sell rotational molder Trilogy Plastics Inc. to Myers Industries Inc.

In an Aug. 6 phone interview, Osborn said he “was looking for the right combination to take forward the vision that we’ve had for 34 years.”

“I wanted a company with the same vision and same culture that made us as good as we are,” he added. “Myers has that culture and Mike McGaugh has that same mindset.”

Myers President and CEO Mike McGaugh added in a separate interview that Myers “had familiarity” with Trilogy.

“We knew [Trilogy] was well run and well operated and had a reputation for quality products and great culture,” he said. “It really fits with Myers’ values.”

McGaugh added that Myers will look to make more acquisitions in rotomolding, injection molding, blow molding and thermoforming. “We want to have a national footprint of rotomolding facilities to deliver better products for our customers,” he said.Potential increases in capital gains tax rates in 2022 were “the tipping point” in Osborn’s decision to find a buyer for Alliance, Ohio-based Trilogy, he said. The federal government has proposed increasing the capital gains rate from 20 percent to almost 40 percent, although no final decision has been made. Any increase would affect business owners looking to sell.

[…]

Myers on Aug. 5 reported second-quarter sales of $187.4 million, up more than 58 percent vs. the same quarter in 2020. The firm’s quarterly profit grew more than 32 percent to $11.1 million in the same comparison.

Trilogy ranked 19th in Plastics News‘ most recently published estimate of North American rotomolders with sales of $26 million. The $35 million sales total would move them to 15th in the ranking.

Myers also does business in injection molding and blow molding under various brands, including Scepter, Akro-Mils and Buckhorn. The firm generates 75 percent of its sales from plastics processing — primarily storage containers and similar products — with the remainder coming from the tire market in repair and retreads.

During the Plastics News Executive Forum in March, McGaugh said that Myers aims to grow both organically and through acquisitions to reach annual sales of $1 billion by the end of 2023. The firm posted sales of just over $500 million in 2020.

PE and PP prices up in June

From “North American resin prices on the move in June” (Plastics News):

Regional prices for all grades of PE were up an average of 5 cents per pound for the month. Makers of high density PE were attempting to add another 2 cents to that total, but that increase had not gone through to most buyers as of June 24. Most regional PE prices had increased 5 cents in May and now are up 38 cents so far in 2021 and 58 cents since January 2020. HDPE prices are up 2 cents less than low and linear low density PE. The June price hike is the seventh consecutive for the PE market.

The North American PP market continued to surprise in June, with prices increasing an average of 12 cents per pound. That surge followed a 13-cent hike that hit the market in May. Prior to that, regional PP prices had dropped 19.5 cents total in March-April. Factoring in previous increases, regional PP prices are up a net of 66.5 cents since December.

The June hike consisted of matching 4 cents of increases in price for polymer-grade propylene (PGP) feedstock and 8 cents of profit margin improvement that was successfully implemented by PP makers. Heading into the last week of June, the PGP hike was expected to be higher and there was doubt if PP makers would see all of the 8 in margin improvement they were seeking. They hadn’t been successful in getting any of the 5 cents in margin they tried to pass in May.

The ultimate makeup of June’s 12-cent hike came as a surprise to some market watchers, including Scott Newell, a market analyst with RTI.

Newell said that North American PP demand is strong across many markets, even though industry data shows a decline from last year. “The data shows sales, which are down because processors can’t get material,” Newell said.

Many PP makers in the region remain on force majeure sales allocations, as the supply chain continues to recover from the ice storm that hit Texas in February. Some producers now are seeking PP price hikes of 3 or 5 cents effective July 1 or 5 cents effective Aug. 1. Producers are not aligned on these moves, which would be in addition to any price changes from PGP. PP makers have gained more than 30 cents in margin improvement in the last year.

From More resin price changes reflect high demand, limited supply” (Plastics News):

Regional prices for all grades of PE were up an average of 5 cents per pound for the month, according to buyers and market watchers contacted by Plastics News. Makers of high density PE were attempting to add another 2 cents to that total, but that increase had not gone through to most buyers as of June 24.

Although PE supplies have been improving since a February ice storm hit Texas and disrupted much PE output, some supply chain challenges remain. Most recently, LyondellBasell Industries declared force majeure on linear low density PE made in La Porte, Texas.

In a June 17 customer letter obtained by Plastics News, LyondellBasell officials said force majeure was needed because of “an equipment failure beyond our reasonable control” at a reactor in La Porte.

Most regional PE prices had increased 5 cents in May and now are up 38 cents so far in 2021 and 58 cents since January 2020. HDPE prices are up 2 cents less than low and linear low density PE. The June price hike is the seventh consecutive for the PE market.

Market analyst Mike Burns said in an email that without additional disruptions, June PE inventory “should help aid the 90-day recovery.” Burns is with Resin Technology Inc. in Fort Worth, Texas.

“There’s still some tightness in the market,” added David Barry, a market analyst with PetroChem Wire in Houston. “Buyers can’t find everything they need, so they’re paying what they have to pay.”