December has been an eventful month so far, so we decided to provide a mid-month update. As we near the year end with status-quo supply, we head into 2022 looking towards normalized supply/demand ratios and building of inventories.
All the information below is retrieved from multiple sources in this very dynamic market about supply and demand expectations based on the largest producers of PC in the market. The projections below are of course subject to potential: 1) government intervention – foreign or domestic, and/or 2) natural disasters like we have seen occur in the last 12 months.
Start of the New Year
Through Q1, we’ll continue to see the status quo of hand-to-mouth supply for PC—material should be available as supply and demand remains even. In Q2, inventories will start to build, which occurs in four stages. This process begins with the majors filling up their inventories, having enough material in the warehouse to ship when orders are placed (instead of having 12-week lead times!).
The second stage is when the distribution companies can build inventories as well for same day or next day shipping. Next comes the molders, who will actually be able to hold pellets in inventory for the first time in a long time, refilling that warehouse space that’s existed for the past two years. Then finally, the last stage is when all of this translates into parts. OEMs can get ahead of their customers, develop their own inventories, and have available parts ready to ship.
Second half of 2022
The levels of supply and demand will start to feel more normal in the market during the second half of 2022. However, when the auto industry decides it’s ready to come back, they’ll be taking a large chunk of the materials for the market.
The automotive industry plans on reentering the market by reducing the number of semiconductors needed to build cars. They’ll be dedicated to only necessary features like windshield wipers and headlights, leaving the bells and whistles of heated seats behind. This has allowed car manufacturing companies to ramp back up operations, like GM who is producing vehicles at every plant of operation (though not at full capacity just yet).
Challenges of 2022
The challenge we’re already seeing that we believe will hang on into 2022 is additives. There are issues with glass, FR, UV, releases, and compatibilizers, drawing big price increases on these products and the materials they go into already. The most significant of these will be with FRs, whether for ABS, PCs, or PCABS. This is mainly due to Chinese dual controls of energy consumption and production, preventing from the additive manufacturers there unable to keep production up with demand. The other factor is the price of phosphorous, which has increased 1.5X in Q4 of 2021 alone, again, because of the dual controls. The coming glass shortages are coming, and other additives seem to be next based on their chemical background.
As we move in to 2022, know that the Star team will continue to be a transparent, reliable material supplier and industry partner. Our goal is to maintain open and honest communication with our customers about their orders and the overall availability of our materials. Especially as the end of 2021 nears, we emphasize that we value your partnership and appreciate your business this year. Please contact us at Sales@StarPlastics.com or contact your local Star Plastics representative if you have any questions about current market conditions or how this may affect upcoming orders.