Plastics Market Pricing to Increase Due to Louisiana Flooding

There are probably not many of us in the US that aren’t aware of the unprecedented flooding that has forced many Louisiana residents from their homes and businesses, leaving record numbers of homes destroyed or badly damaged.  What hasn’t hit the news is the “collateral damage” that will soon be felt across the rest of the country as resin producers move to increase prices, virtually guaranteeing price increases on all types of plastics in the upcoming weeks.

According to packaging industry expert, David Varsano, CEO of Massachusetts-based Pacific Packaging, we will all soon be impacted by the natural disaster in Louisiana.  In August, Varsano noted that, after a long period of level pricing, resin manufacturers are moving quickly to implement immediate price increases as a result of the recent flooding that closed a Hi-Density resin plant in Baton Rouge and disrupted a natural gas pipeline.  In addition, flood waters have created logistical nightmares with rail lines coming up through the Gulf region, further disrupting service, and tightening resin supplies. Lastly, said Varsano, new resin production that was scheduled to come online in the third quarter of 2016 has now been pushed back to the second quarter of 2017.

Industry pricing experts note that Exxon was the last to announce the $0.05 increase; the flooding basically guaranteed that the increase would happen. Other manufacturers had already announced increases for September 1; however, it appears that most will take effect September 19-23 depending on the manufacturer. Wide-spec low density resin is already up $0.03 / lb., to be followed by another $0.02 increase in September. Complicating matters further, resin on the secondary market is virtually nonexistent.  

There is still sentiment that there will be softening before the end of the year, but now the softening will be off of the $0.05 increase, rather than from previous lower levels. Says Varsano “Basically, we can expect 90 days of instability” in the market – and don’t lose sight of the fact that “a hurricane could destabilize things even more”.     

With many traditional investment vehicles delivering minimal returns, perhaps this is a good time to invest in a little extra inventory at current market prices – in advance of these increases. Given the current market environment, the savings in 2016 will provide a nice contribution to the bottom line.

  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client