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Home / Blogs / An update on the polymer shortage

Home / An update on the polymer shortage

RESILINC BLOGS
Polymer

An update on the polymer shortage

Aug 17, 2021

Resilinc Editorial Team

Supply Chain Disruptions, Supply Chain Event Monitoring

After unprecedented disruptions in the second half of 2020 and the first quarter of 2021, the turmoil in supply chains for polyethylene (PE), polypropylene (PP), mono-ethylene glycol (MEG), and other polymers has calmed somewhat. Still, supplies remain tight, and prices are at record highs—with further price hikes forecast.  

Even though supply disruptions have eased from 1) the worst days of the pandemic lockdowns, 2) Hurricane Laura and 3) the Texas deep freeze, Resilinc’s EventWatch continues to alert customers to a large number of potential disruptions related to polymer. And, unfortunately, public statements from major petrochemical producers underscore that the shortages aren’t over.

In First Quarter earnings calls, Exxon Mobil, Dow, and LyondellBasell all reported that they were “selling everything they produce and [didn’t] anticipate being able to restock inventories until the third or fourth quarter.”

With the Atlantic hurricane season gearing up and COVID-19 surging in some Gulf Coast regions – where the petrochemical industry is concentrated – polymer supply chains and manufacturers that depend on these materials can’t relax anytime soon.

One result of the polymer supply disruptions has been a shift in thinking about inventory levels: many companies dependent on polymer supplies are no longer comfortable in operating on just-in-time (JIT) inventories and taking a cue from China.

In China, building up inventories is a trend that predated the pandemic. For example, in an October 2020 presentation on China’s rapidly growing and highly integrated petrochemicals market, data showed that average inventory levels for MEG—a feedstock used predominantly in polyester fibers, PET plastic packaging and bottles—almost doubled between 2017 and 2020.

Because the plastics made from chemical polymers are used in every kind of product imaginable—from packaging and appliances to smartphones and car parts—the polymer supply disruptions have caused shortages and cost increases across many industries. Yet because these raw materials are often used to produce low-cost items like resins and adhesives, many supply chain managers fail to adequately monitor their polymer supply chains.

Many companies also make the mistake of paying close attention only to their direct suppliers and not to their suppliers’ suppliers. Best-in-class companies take time to identify the suppliers’ suppliers that are critical to the continuing production of their top revenue generating products. They proactively map, monitor, and protect those entire supply lines. The polymer supply turmoil underscores the reasons why these and other supply chain risk management practices provide competitive advantages and long-term value.

 

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