Plastic Resin Shortages, Allocations and Force Majeure

(Newswire.net — March 16, 2021) Anaheim, CALIFORNIA —

Global Shortages and Price Increases in most raw materials

For the last several months, most raw materials, including Steel, Wood, and Plastics have seen significant shortages and supply chain delays. In addition, most shipping methods, including local, long distance and global have been fraught with delays.

To compound issues with the Plastic supply chain was the total shutdown of most processing plants in Texas due to the recent freeze.

Plastics are a petroleum-based product. The first product produced from the base crude is gasoline. Then the remaining components are broken down (cracked) through petroleum processing plants. In late 2020 and early 2021 the production of gasoline was reduced due to demand. This caused a forced slowdown in the production of the components used to produce plastic materials.

The freeze in Texas caused massive damage to the petroleum processing plants. When severe weather is anticipated, like Hurricanes, the processing plants can do an orderly and planned shut down to protect the equipment. This freak freeze was not anticipated and did not give the processing plants enough warning to do the orderly shutdown. These plants were hit with sudden freezing temperature, which caused major damage to the pipes and values that were carrying hot materials. This caused cracking in the large pipes and valves, requiring major repairs and replacements.

Texas produces roughly 4.6 million barrels of oil per day and is home to some of the nation’s top gasoline and diesel producing refineries. 18 of 30 Texas refineries were knocked out of production, and all but 2 were restarting by mid-March. The backlog of demand is vast and may take months to get back to full production and filling the void caused by the freeze.

The effect on the already tight plastic resin production has been massive. Pricing on some of the base materials like Polyethylene and Polypropylene have jumped by as much as 40% in less than 2 months. And in addition to the large increase in base materials is the long lead times in production. Many factories have seen production times increase from 2 – 3 weeks to 3 -4 months. Stock levels in most plastic materials are lower than anytime over the last several years.

Many of the plastic resin manufacturers have declared Force Majeure. This cancels most existing pricing contracts and delivery guarantees. Current expectations from these manufacturers are this will continue for the next several months until the supply chain returns to normal. Shortages and allocations are global in scope and have caused slowdowns and shortages in many sectors. Shortages of shipping cargo containers is also limiting global delivery of goods. Many shipping ports that handle these shipping containers have been backlogged.