COVID19: Plastics industry faces raw material shortage

The Covid-19 pandemic has caused a shortage affecting all the most commonly used polymers: polyvinyl chloride (PVC), polyethylene (PE), polypropylene (PP) or polyethylene terephthalate (PET) ....

More than 90% of the plastics processors established in Western Europe are affected by this supply crisis, and many are forced to reduce their production and turn down new customers in order to be able to honor their existing contracts.

The factors behind this situation:

• In Texas: a series of plant shutdowns following weather events. The recent polar cold snap has crippled the Texan chemical industry, which has struggled to restart its activity.
• In Germany: floods paralyzed some factories.
• Following the 2020 confinement periods linked to the measures put in place to fight Covid-19:
  • Factories have been shut down or significantly slowed down to allow them to carry out maintenance (scheduled or postponed maintenances following Covid-19).
  • Problems related to travel difficulties for maintenance staff, and more particularly highly qualified people.
  • Spare parts delivery times were also observed.
• Lack of containers: the maritime container transport market is struggling to rebalance itself after the forced shutdowns of the global economy and logistics chains at the height of the pandemic in 2020. Impacting the transport of polymers and additives.
• Rising Oil Prices: Crude prices (plastic being derived from petroleum) have more than tripled over the past 12 months.
• Increased demand: the current strong demand, in the face of declining supply, has tended to push prices up, sometimes going up to 40 to 50% increases.
• Recovery after Covid: Markets in the United States and Asia are currently sucking up much of the available plastic (including European) at a high price. This pushes the prices upwards, for example the price of LDPE resin for films exceeded 2,000 euros / tonne in March, against a little over 1,200 euros last October.

Faced with these circumstances, many producers make force majeure declarations to free themselves from their contractual delivery obligations to processors of semi-finished products.

Discover the RTL INFO report on this subject on the link below.