Polymer Supply Crisis: Unprecedented material shortages
Last Updated: 3/3/21
The global petrochemical industry is facing a supply crisis following the recent storms in the USA affecting large parts of the polymer industry. The industry had already been severely affected by COVID in 2020 and these recent unplanned shutdowns have made a bad situation worse.
All suppliers and grades are affected across all thermoplastic product groups: polyolefins, engineering polymers, styrenics and specialities.
There are many factors involved.
Whilst COVID lockdowns initially led to a drop in demand for many polymers, COVID has seen growth in demand in many areas (packaging, PPE etc.) As economies have reopened following lockdowns, the demand for polymers has outstripped supply. Lockdown has also reduced demand for oil refinery products (transportation fuels) meaning that many of the by-products needed for polymer production are not being produced. This has led to many polymer plants going into Force Majeure as they have nothing to polymerise.
In addition to many unplanned shutdowns, much of the new planned capacity was delayed due to COVID and scheduled maintenance shutdowns still went ahead leading to significantly reduced supply.
COVID has also led to an imbalance in location and a shortage in available shipping containers with freight rates from East Asia to Europe seeing fourfold increases from November to January. As a result, imports of polymers to Europe were restricted.
However, it is the recent storm in the USA that has made this a full-blown crisis according to many industry commentators. The storm has forced 42% of US oil refining and almost 30% of the total US Chemical Industry capacity offline. The range of products affected from Ethylene to Styrene to Butadiene is extensive with some products seeing a 100% loss of availability. As an example, Polypropylene has lost 90% of production capacity.
Prices for polymers, monomer and intermediates are now hitting record highs with spot propylene in USA trading at the equivalent of £1,965 / MT at the end of February
This is a very challenging situation and we are sorry to say that it is highly likely that this will affect your supply chain – not only as a Plastribution customer, but in general as a purchaser of plastic raw materials.
It is likely that lead times for products will be extended and, in some cases, we may not be able to confirm supply. However, we will keep you updated regularly and wherever possible and offer alternatives as appropriate.
We may have to reduce the order size we are willing to accept for certain products as we try to minimise disruption to all of our valued customers.
Although the causes of this crisis are beyond our control, it is our ambition to keep you as informed as we can throughout its duration.
We will be updating this Hot Topic regularly with new information as we receive it, so please keep checking this page for the latest updates. Our monthly Price Know-how report will also keep you informed of any effects this will have on polymer pricing.
If you do have any specific concerns, please discuss these with your Plastribution account manager who will be happy to assist you wherever possible.