A recap of December, and What We See Moving Forward
At Star, it is our priority to produce materials to the quality level that you require and provide lot-to-lot consistency to meet your needs. The events of the last few months have changed the supply of the plastics market significantly, putting into motion dramatic increases in cost, lead time, and material availability.
We communicate daily with industry experts and a diverse group of suppliers to maintain an ongoing pulse of the plastics market, which allows us to maintain surety of supply.
The North American Plastics Market is experiencing direct and indirect effects from not only shortness of supply, but also from non-plastics related events. Below is a recap of what we’ve been seeing in the market these past two months.
Unprecedented Changes to the Plastics Market Begin
In early December, there were unprecedented changes in the ABS and PC markets from North American major producers along with Asian Producers importing material into North America.
Regarding North America supply and pricing, lead times jumped from 6 to a firm 10 weeks for ABS FR and GP, along with PC FR and GP, and major suppliers implemented a 9 cpp increase on their major product lines that are to continue through January. The supply curve could not keep up with the demand for ABS.
For Imports, China won the short-term battle of supply as their economy opened quicker than others due to COVID, but importers then signaled they would be keeping their material in Asia and only supply locally. This strategy would lower costs and increase their margins due to no duties or tariffs and limited freight. This shorted the North American market for ABS and PC materials, especially as LG Chemical facility was shut down due to a November 2020 fire, removing an additional 12% of the global ABS supply.
Lotte and Chi Mei both increased pricing by 20 – 45 cpp and extended lead times to 4 months. Other Asian suppliers are following suit with 16-week lead times for delivery, and then update prices just 2-3 weeks before shipment.
December Plastics Market Summary
In summary, the theme for December was consistent: unprecedented price increases and shortness in the NA market with Asian supply not coming into North America. A 30% reduction in PC supply in NA by Asian suppliers began and will continue for the foreseeable future. Asian supplier offered to supply but at a minimum increase of 50% in base cost, plus extended lead times – not a good option. We are seeing this offer throughout the North American market.
North American producers are now at maximum output, and lead times extended to 10-12 weeks. As seen in the market and reported by IHS Markit, “bidding” is increasing the cost of existing orders to current suppliers from different channels of the same materials. Those same suppliers are not seeing the availability in the market for feedstocks in the past.
All of this will also affect secondary markets for lower end compounders quickly, not being able to supply customers with the lower end feedstock materials, so they too will start consuming the PC prime supply. All because the shortness in the market.
With tightness in the market and our position, we would expect the prices in all materials to continue to move up looking into 2021.
Star Adapts to New Market Conditions
With all that being said and to maintain transparency, the market is pushing us to apply specific strategies to continue production and maintain current business and relationships:
- We will take care of base business customers first and are not taking on new customers while these market conditions persist.
- We’re now implementing a new six-week lead time for all orders. At three weeks, we will confirm the completion date and as a last resort, cost of the specific order.
- We can no longer take open-ended order entry—the current market unfortunately does not afford that luxury. Once an order is completed, ownership will move from Star to the customer.
We appreciate your understanding as we, and everyone one else inside the plastics industry, are adapting to this new market we are experiencing.
As these changes in the market continue, we will update our customers, partners and colleagues of what we’re seeing moving forward. Check back here for future updates and contact us at Sales@StarPlastics.com with any further questions.