Market Dynamics Redraw The Graph Of Resin Supply

This year will see continuing changes in many aspects of resin supply. Producers are reacting to a variety of market influences with strategies that will affect product availability and pricing in volume resins for years to come. These strategies derive from marketplace changes – new regional capacity, global shifts in plastics processing, and of course, efforts by producers worldwide to improve margins.

Overcapacity in resins like PE, PET, and PP continues to bedevil producers. While in the past this may have kept prices low, more resin makers are responding by shuttering plants and postponing expansion. The result could be spot shortages in areas where supply cutbacks are extensive; also, higher prices. Resin producers want firmer margins, as well as returns that justify reinvestment. Some observers think that this time around there may be enough pressure on profits to keep producers focused on achieving this level of return. As an example of how low some prices dropped, look at PVC. Last year, increases of 30 to 40% were pushed through and held. Despite this, PVC pricing is only at 1997 levels.

As producers seek to balance supply and improve pricing, processors can expect to see fewer grades and innovations in commodity resins. Moreover, the consensus is that unless it’s a high-volume application, processors will find R&D support limited. This may not be as bad as it seems. Smaller resin makers and more compounders will doubtless fill the void in service and product development, creating new materials, new relationships, and driving innovation. But the trend to reduced R&D may further commoditize some resins and affect demand and pricing.

The outlook for 2003 has bright spots. Specialty materials like TPE, polyurethanes, and engineering resins should see solid growth. And plastics continue to make sizeable advances in product design and specification, while per-capita consumption in many highly populated parts of the world keeps growing.

There are, as always, plenty of opportunities for plastics. They will just be realized in a market that is undergoing some fundamental changes in how resins are produced and supplied. Understanding these changes and learning how best to capitalize on them, will be critical to success in 2003.