As we move into the second quarter of 2022, the Eastern European War has slowed the economy across Europe to a crawl, energy costs are up 5-fold, and supply for polymers and additives is difficult at best. This has global implications on costing and supply for nearly every polymer.
In North America, demand is firm for PC through Q3-22 and into Q4 based on the indications of key markets (see next paragraph). Cash cost was up 4 cpp in April, bringing the actual cost of producing PC 10 cpp more than expected YTD at the beginning of the year due of supply chain disruptions. It is expected to continue to increase again by the end of Q2/22, with prices expecting to peak around the July / August time frame.
Despite the slow global economy, housing, appliance, electrical/electronics, and auto markets are still driving the strong demand for PC. Pricing is expected to increase an additional 8 cpp through Q2, though Covestro has released targeted 20 cpp price announcements to the 10-14 cpp rate. However, Sabic seemed firm in their 10 cpp increase for the month, especially as their PC resin plant in Alabama is down until mid-May for a maintenance turnaround.
Star Plastic lead times were reduced and announced this month to 8 weeks. Lead times from the majors remain at 14 weeks with the expectation that it will be reduced to 8 weeks in the future. Why? Sabic will likely reduce their 14-week lead time as it makes sense when their plant comes back from maintenance; lead times will then come down.
Demand for ABS continues to be firm and expected to be the same through the end of the year, specifically relative to the automotive market with the semiconductor shortage hampering output. The demand in the housing and appliance markets continues to be strong, playing a significant role in the demand for ABS, with manufacturers in those industries not able to keep up with any inventory of parts.
Price for ABS should peak in the next month, with costs are 24 cpp higher than expected, and yet again, the war in Eastern Europe is a significant contributing factor. The related increases are expected to wane in the April / May time frame and start to drop gradually over the next 7-8 months.
Imports supply about 1/3 of the ABS demand in North America in a ‘normal’ market. Now with the slower economy in Asia, there is material available to move to North America and Europe. However, freight costs are key to supply with normal 20 cpp addition for freight costs currently. This makes the material from Asia more expensive to supply into North America and at about equivalent pricing with North American supplied ABS. If the slowing economy in NA reduces freight costs, the surcharges will come off from Asian imports, and the price will drop significantly. This will cause a domino effect with a price drop for NA-produced ABS materials as well. Another big factor that will come into play here is how COVID continues to cause issues in Asia looking forward.
Regarding lead times, 8 weeks is becoming the new norm as supply gradually increases by year end, by which time we expect to be back to a 2-week lead time. (Did we mention that Star Plastics is on an 8-week lead time already?)
Nylon pricing has been moving up for both 6 and 66 as markets for packaging, construction and automotive are seeing strong demand. For automotive, compounding grades of Nylon 66 that include glass and FR continue to be in short supply. This causes additional increases in price. Unlike PC, there is a shortage in the market of 6 and 66 with elevated prices and strong demand – cash costs have increased 8-9 cpp over the past month. Looking forward, prices for both will remain high due to European natural gas, energy costs and ongoing supply shortages.
PBT is also experiencing strong demand, with limited supply in FR and glass reinforced versions driving prices up. While cash cost has dropped 1 cpp in the past month, the price is expected to continue to go up due to cost to produce as well as secondary additive increase.
Ocean freight continues to be backlogged, and port congestion globally is not letting up. Costing per container is still at $16k-$18k with continued long lead times to get out of port. We expect that these conditions will remain through the end of the year. As of mid-April, over 1,800 boats were waiting for berth space to unload/load globally. That represents 20% of all boats worldwide. (See link below)
Expanded lockdowns in China are severely impacting the congestion outside the country’s ports. Specifically in Shanghai, boats are backing up at the city’s port — which is the largest in the world in terms of container throughput– and the effect on global shipping was quickly felt. The number of container vessels waiting outside of Chinese ports is 195% higher now that it was in February.
As an alternative, some have been trying to move material through the East Coast, avoiding the West Coast backlog. However, there are other obstacles such as shortage of drivers, trucks and frames to move the containers. The theme for intermodal shipping seems to be hurry up and wait.
Please don’t forget that we appreciate your business, being a valued partner to Star Plastics and we look forward to working with you well into the future. Please contact us at Sales@StarPlastics.com or your local Star Plastics representative if you have any questions about current market conditions or how this may affect upcoming orders.