The plastic materials market is in a very tenuous position.
Low domestic demand, a result of the recession, has forced many resin producers to tighten their belts and therefore their supply. At the same time, international demand has risen courtesy of the growing economies of China and India. To accommodate that shift in market dynamics, the big players in the chemicals industry have focused their efforts on satisfying overseas demand.
All of this led to domestic delivery issues over the course of 2009. Those problems will persist in 2010 and will probably grow in scale as producers actually shut down North American ethylene production facilities just as Dow recently did.
Based on the laws of supply and demand – more manufacturers vying for less material – the price of resin is scheduled to go up in excess of 24% in February and March. Other increases are in the works for the remainder of 2010. It may prove to be a period as volatile as 2007-2008 when material costs exceeded 90 cents a pound.
That said, Confer Plastics will have to revisit pricing throughout the year, even for those who have submitted blanket purchase orders or are hoping for fixed pricing through an entire marketing year. Confer Plastics will have to adjust our quoted prices to you on a regular basis and, depending on the severity and number of the spikes in resin costs, it may occur as often as every 45 days.
We will endeavor to achieve the best possible prices we can in an effort to minimize the financial impact to both you and Confer Plastics. But, please understand it won’t be an easy task. The plastics market was not healthy prior to the recession and with certain facets of the world’s economy becoming healthy the inherent weaknesses of the market will be realized again.
As the market puts out more feelers about the future I will be sure to keep you in the loop.
Sincerely,
Bob Confer
Low domestic demand, a result of the recession, has forced many resin producers to tighten their belts and therefore their supply. At the same time, international demand has risen courtesy of the growing economies of China and India. To accommodate that shift in market dynamics, the big players in the chemicals industry have focused their efforts on satisfying overseas demand.
All of this led to domestic delivery issues over the course of 2009. Those problems will persist in 2010 and will probably grow in scale as producers actually shut down North American ethylene production facilities just as Dow recently did.
Based on the laws of supply and demand – more manufacturers vying for less material – the price of resin is scheduled to go up in excess of 24% in February and March. Other increases are in the works for the remainder of 2010. It may prove to be a period as volatile as 2007-2008 when material costs exceeded 90 cents a pound.
That said, Confer Plastics will have to revisit pricing throughout the year, even for those who have submitted blanket purchase orders or are hoping for fixed pricing through an entire marketing year. Confer Plastics will have to adjust our quoted prices to you on a regular basis and, depending on the severity and number of the spikes in resin costs, it may occur as often as every 45 days.
We will endeavor to achieve the best possible prices we can in an effort to minimize the financial impact to both you and Confer Plastics. But, please understand it won’t be an easy task. The plastics market was not healthy prior to the recession and with certain facets of the world’s economy becoming healthy the inherent weaknesses of the market will be realized again.
As the market puts out more feelers about the future I will be sure to keep you in the loop.
Sincerely,
Bob Confer
