PE and PP producers back to 70% of normal operation

From Hunt for resin continues, even as supplies improve (Plastics News):

Market sources indicated that regional operating rates for PE and PP were back to 70 percent by the end of March. PVC production also had improved, but production of PVC compounds was still being affected by limited supplies of additives, sources said.

In spite of some improvement, North American resin distributors are facing ongoing challenges in getting material to their customers.

“Polyethylene is a little better than it was two weeks ago, but polypropylene hasn’t improved much,” said Marc Fern, executive vice president at M. Holland Co. in Northbrook, Ill. “No one’s getting everything they want. It could be May or early June until supply is back in balance.”

Expect 25% to 50% higher shipping costs locked in for the year

From Higher Shipping Costs Are Here to Stay, Sparking Price Increases (SupplyChainBrain):

Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers.

The price for a container of goods from China to the U.S. West Coast and European ports has hovered near record highs for several months, and conditions are ripe for more increases even though spot rates usually soften this time of year. What’s more, new contracts being signed by some of the biggest U.S. importers indicate the spike won’t be a short-term blip.

Most large retailers and manufacturers sign annual deals with the ocean carriers to lock in their container freight rates, in private negotiations that typically take place this time each year.

Along the bellwether trade lane linking Asia with North America, contract rates in recent weeks are coming in around $2,500 to $3,000 for a 40-foot container — 25% to 50% higher than a year ago, according to George Griffiths, an editor on the global container freight-pricing team at S&P Global Platts.

“That’s showing that people are expecting this to continue, that they’re not expecting rates to come down any time soon,” Griffiths said. The container carriers “are going into this in a significant position of strength,” he said.

PP prices fall an average of 12.5 cents per pound in March

From Polypropylene resin pricing roller coaster continues its wild ride in March (Plastics News):

North American polypropylene resin prices continued an unpredictable 2021 by falling an average of 12.5 cents per pound in March, but signs point to price hikes soon.

Demand for PP resin remained strong across many end markets in March. The price decline was the result of a demand drop for propylene monomer feedstock. 

Propylene demand was down as many PP resin plants were struggling to come back from outages caused by Winter Storm Uri, which hit Texas in mid-February. Regional propylene monomer prices were down 18.5 cents per pound in March.

Polypropylene resin pricing roller coaster continues its wild ride in March

US Plastic Pact plans list of “problematic or unnecessary” packaging

From US Plastic Pact eyes major changes in packaging (Plastics News):

Meeting the ambitious goals of the new U.S. Plastics Pact will require major changes in packaging design and recycling, according to the head of the organization.

Emily Tipaldo, executive director for the pact, thinks it could, for example, require doubling the recycling rate for plastic bottles and asking hard questions about whether companies should keep using resins with poor track records around sustainability.

The pact was formed in August by consumer product brands — and major buyers of plastic — such as Coca-Cola Co., Unilever US and Clorox Co., who see it as a way to find common ground at a pre-competitive level to meet ambitious plastics goals that they have publicly set.

At its August launch, it announced some big goals for plastic packaging, all by 2025. They include a 50 percent recycling and composting rate, 30 percent recycled or bio-based content, having 100 percent of plastic packaging be reusable, recyclable or compostable, and eliminating “problematic” plastic packaging.

When you consider the gap between those goals and where plastics recycling is now in the U.S. — the overall U.S. recycling rate for plastics in containers and packaging is 13.6 percent — there’s a lot of ground to make up.

By the end of the year, the pact plans to publish its list of “problematic or unnecessary” packaging that member companies aim to phase out by 2025. Tipaldo said the list illustrates how the pact’s goals are intertwined because replacing hard-to-recycle resins with different materials or with reusable packaging will make it easier for the pact to hit its 50 percent overall recycling rate.

The group, she said, will be “thinking through what are the resins and [packaging] formats that we really need to maximize in order to achieve that 50 percent piece.”

PE up 7 cents per pound in March, a chance for normal supply by end of Q2

From A March toward higher prices for commodity resins (Plastics News):

Prices for all grades of polyethylene moved up 7 cents per pound in March, after increasing by that same amount in February. Prices had increased by 5 cents in both January and December, as the market was tight even before the storm hit. North American PE prices are up a net of 39 cents since January 2020.

PP prices had surged an astonishing 61 cents per pound since December but now are expected to decline along with propylene. Market sources said the drop could range from 6-16 cents.

“These supply challenges aren’t going away quickly,” said Bruce Flannery, commodities product director for resin distributor Amco Polymers in Orlando, Fla. “Suppliers are incentivized to come back up as soon as possible because of these high prices. And high prices haven’t driven away demand.”

He added that weather-related shutdowns essentially removed more than 2 billion pounds of North American PE and PP production and “once that’s gone, it’s gone.”

“We have a chance to get back to normal [supplies] by the end of June, but restocking the supply chain will take most of the third quarter,” Flannery said.

Warehouses empty after plastic market’s perfect storm

From Resin Squeeze Hits Plastics Makers, Hurting Autos and PPE (Bloomberg):

At the root of the problem lie a series of factors ranging from plants being shut down, the winter storm in Texas and the global shortage of shipping containers — which got thrown off their usual routes due to the pandemic. Add to that the strong economic recovery in Asia and demand for consumer goods in the U.S., and companies are at pains to secure supplies.

Derived from crude oil, base chemicals ethylene and propylene, are the building blocks of plastics.

More than 80% of packaging manufacturers face that problem, Germany’s IK sector body said earlier this month. General Manager Martin Engelmann termed the situation “dramatic.”

“It has gotten so far that the warehouses are empty and the first businesses are unfortunately forced to stop production because there’s not enough raw materials. And that’s particularly unfortunate because demand is high — not just for food but also the automobile sector or furniture,” he said.

Resin supply shortage and high prices likely to continue

From Resin plants restarting, but supplies remain tight (Plastics News):

Some production of resin and feedstocks is returning to Texas and other parts of the Gulf Coast, but tight supplies and high prices are likely to continue at least through the first half of the year.

In the wake of Winter Storm Uri, which hit the region in mid-February, many material suppliers continue to have customers on force majeure sales limits or other types of allocation. Market sources contacted by Plastics News said that supplies of many commodity plastics are limited, if available at all.

Some plastics processors throughout the U.S. already have made production cuts, while others are concerned they might need to in the next few weeks. Automakers including Honda and Toyota already have made production cuts because of supply chain issues including foam for seating and microchips in a separate shortage issue.

The ice storm and extreme cold also affected supplies of adhesives needed to make gaylords and other cardboard boxes needed to ship resin. Box maker International Paper of Memphis has told customers that their production may be affected as a result.

Ocean and Air Shipping Costs Outlook

From McKinsey Sees Global Freight Costs Elevated for a Year or Two (Bloomberg):

The cost of shipping goods across the world’s oceans and air routes may stay high for a year or more as consumer demand stays strong and the already tight supply of capacity to move cargo commands a premium, according to McKinsey & Co.

That’s the outlook of Ludwig Hausmann, a partner in McKinsey’s office in Munich. He explained it this way:

* On the ocean side: He sees container rates staying high because a now-consolidated liner industry’s past tendencies to wage price wars has “completely vanished so there is more discipline around balancing supply so that it fits demand.” On top of that, a lot of long-term contracts with shippers have already been agreed for the next year or two — and “that will lock in a higher price.”

* On air cargo: In the past, many smaller airlines operated long-haul planes that added to cargo capacity. Hausmann’s view is that the future will be “more of a professional’s game” involving bigger airlines that don’t allot more aircraft on certain lanes. As a result, the easing of air-freight supply constraints “is also not happening too fast.”

Yeti discusses avoiding import delays

From Yeti Eyes Houston’s Port Amid West Coast Ship Congestion (Bloomberg):

Consider how Yeti, the billion-dollar brand of premium coolers and stainless-steel drinkware, is exploring ways to help ensure 2021 inventory targets are met. On a conference call this week, Senior Vice President and CFO Paul Carbone said the Austin, Texas-based company is trying to avoid shipping delays a few different ways:

* Testing alternatives like Houston’s port, which is “right down from our Dallas-Fort Worth distribution center,” he said. “So we’re going to send some ships into there.”

* Using different and faster shipping lanes out of Southeast Asia to cut down on transport time.

* Cross-docking, which means having trucks ready to collect containers straight off the ship rather than having them stored for pickup later.

March 21 deadline for potential strike by Montreal longshoremen

From “Montreal Dockworker Strife Threatens to Slow Cargo Traffic” (Bloomberg):

If a contract is not settled by then, the longshoremen could strike at a port that data show handled 35 million metric tons of goods and commodities in 2020. The Canadian government has asked both sides to work toward an agreement, noting it “is keenly aware of the central role the Port of Montreal plays in movement of goods” to the most populated part of the country.

[…]

This latest conflict could be a harbinger of what’s to come at larger U.S. ports next year, as the pandemic hastens the adoption of automation in other workplaces. A three-year contract extension for West Coast longshore workers at 29 U.S. ports will expire next year.