Production in US Factories Sidelines as Surging Plastic Rates Offsets Downstream Margins

The repercussions caused by cold snaps in United States has not only hassled the manufacturing in Texas and Southwest but has also triggered a prolonged shortage of plastics and solvents across the globe. Following the shortage of raw materials, production from various factories in US have come under dark shadows compelling them to impose a temporary turnaround till the shortage subsides and feedstock prices drop down to original levels.

As per several automotive and electronics manufacturers, the shortage of plastics is turning out as the largest glitch which is affecting the downstream manufacturing activities devastatingly. In mid-February, freezing cold snaps deaden activities in Louisiana and Texas which is the base for many industries that transform oil to polyethylene.

With more than 75 percent of Ethylene and 60 percent of Polypropylene getting sidelined by the ripple effects of freezing cold temperatures, supply of plastic feedstock has crippled adversely around the globe. As of now, exact consequences are tough to determine, however with petrochemicals adhering to one third of the total automotive manufacturing cost, supply chain disruption has laid a direct impact upon the operations in automotive industry.

In line with the supply shortage, BASF on 17th March 2021, announced an increase in prices of various products w.e.f. 1st April. These include Resins, Dispersions, and Polyurethanes. Increase in Acrylic Acid Dispersion Prices will be near USD 331 per MT, Styrene Acrylic dispersions will be increased up to USD 220 per MT whereas Polyurethane product prices will be increased up to USD 287 per MT. As per the experts, soaring cost of raw materials as well as their limited availability, along with rising manufacturing cost and transportation charges has led to the increase in prices of the above-mentioned products.

One of the renowned chemical giants, Dow has revealed that they expect their plant activities to return to normalcy by April.

As per ChemAnalyst, “Global petrochemical market is facing high volatility due to tight feedstock supply, although plants are expected to reach normalcy in operating rates by April, customers are likely to be crippled under decreased margins and delayed orders for long. Thus, the downstream industries are expected to take long to attain profit normalcy.”