In May, we saw more of the same. Demand was still incredibly strong, and price increases continued across nearly all resins. Production has not returned to normal levels and remains inconsistent. ABS, PC and Nylon in North America are sold out through 2021.
There are still large delays at all US ocean ports with container ships waiting at anchor to be unloaded, along with global container availability out of balance. The icing on the cake is a serious shortage of NA licensed CDL drivers, leading to through-the-roof freight rates. These conditions have created lead times of 16 weeks or more as the new norm.
On a positive note, while pulp/paper feedstock is still tight, it’s improving
IHS is reporting increases across the board for engineering resin in the US, EU and Asia, and is forecasting increases through Q3 and Q4 for most polymers. We’re seeing demand being greater than supply.
Polycarbonate production in NA is rising, but demand continues to exceed supply. Shortages related to Storm Uri and issues at NA PC manufacturing from Q1 created a deficit of material and we’re still feeling the effects of that through May. Backlogged orders and rising exports/falling imports will keep PC supplies tight as we move through the year.
Sabic has implemented sales controls on all PC, PCABS, and ABS products effective May 27, and has recently implemented order cancellations for customers who did no business with them in 2020.
In the first week of June, Covestro has lifted their FM on all PC products except Makroblend. However, the gap between capacity and demand will be hard to come back from.
Samyang has restarted their PC operations after a planned six-week maintenance event and should start accepting new orders late June. Materials remain oversold for other Asian suppliers (Lotte and Chi Mei).
Based on market conditions, it seems majors are still in fire-fighting mode in supplying customers – instead of manufacturing large amounts of each material at a time, they’re hitting the material must-haves, increasing the amount of runs and downtime between each.
ABS is expected to remain tight; shortages persist, and some orders or allocations have been reduced or cancelled. Inventory replenishment is unlikely before the end of the year – there’s simply insufficient production capacity to satisfy current demand and no opportunities to restore inventory.
A production issue example is shown through Ineos postponing the startup of its France ABS plant until later this year due to technical problems at the facility.
Price increases greater than IHS forecast seem likely as the year continues.
Nylon 6 and 66 are seeing tightness and price increases as demand continues to rise with the strong growth of the appliances and E&E market segments. A fire in May at a Florida Nylon manufacturing facility was reported, though they do not see it affecting material availability greatly.
Styrenics supply in Asia is still not at normal levels with some producers, but others are regaining capacity (but not missing the opportunity to price at market levels). Some companies are not meeting allocations.
Like most materials these days, demand continues to outpace supply, and suppliers have uncertain availability.
Transportation costs from China to US West Coast are up over 200% since a year ago, and congestion at US ports, along with shortages of truck transportation, are pushing container fees even higher.
Global container availability is out of balance, and costs are climbing. Asian exporters are requiring their containers to be unloaded at the port (not allowed inland) and shipped back empty to Asia for future shipments. This leaves limited (if any) available containers to ship from US and EU, and of course, surges in container pricing.
With containers not allowed inland, rail and over-the-road trucks are left to carry the load, exceeding NA freight capacity. This, along with the serious shortage of CDL licensed truck drivers, has caused freight rates via truck to sharply increase.
With the holiday season on the horizon, big box retailers will begin working on getting products on the shelves – to accomplish this, products will need to be shipped in July from Asia, putting even more pressure on the logistics market.
It can go without saying (though we’ll say it anyway) that between lack of container availability, freight capacity, and licensed truck drivers, lead times are also negatively impacted.
Semiconductor shortages continue, limiting the assembly of vehicles, appliances, and other goods. This shortage alone is forecast to reduce production by over 1 million units through the next quarter.
The only bright spot here is that with automotive market stalled, they’re not consuming as much plastic as they normally would, affecting PC, ABS, Nylon and other engineering grade resins.
The next logistics-related item to complicate the already complicated transportation industry will hit us in July-August, as big box companies require products shipped from Asia preparation for the upcoming holiday season. We all can imagine what happens to container costs as available capacity is further reduced.
Pulp and paper feedstock, while still tight, is improving, and we’re hoping to see positive movement in availability of packaging as the year continues.
While resin prices are surging higher on unprecedented demand and rising costs, operating rates in NA production plants are projected to rise in the next quarter. However, we’re unlikely to see ay backlogs worked down or inventories restored anytime soon, and this does not apply to all resin production. With majors producing at full capacity and demand continuing to outpace supply, the market will remain unbalanced through 2021.
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