A global pandemic, extreme cold weather in Texas, surging consumer demand and clogged transportation systems have combined to create a chaotic situation in the plastic resin market. Supplies of many resins are desperately low, and other raw materials used for molding plastic parts, such as metals and glass, are also in short supply.
With so many unpredictable circumstances at work, many resin producers are claiming force majeure, leaving OEMs and molders to find creative ways to keep production moving.
Winter storm Uri caused Texas and Gulf Coast resin producers some major headaches. In mid-February, over 80% of polyethylene and polypropylene production was temporarily offline, for example. At the same time, a sudden spike in consumer demand for many products caused massive resin shortages. One industry analysis showed 12 out of 15 types of plastic materials on force majeure as of mid-February.
“We’ve never seen so many resin manufacturers declare force majeure at the same time,” explains New Berlin Plastics vice-president of sales Joseph Mechery. “It’s a mass disruption that’s impacting all areas of our industry.”
The uptick in demand for plastic products has also stretched America’s aging transportation network to its limits. According to the Cass Shipment index, which tracks shipper volume, the sudden rebound in consumer demand has caused a 30% upswing in freight activity throughout the U.S.’s already-congested transportation network.
According to the Morgan Stanley Freight Index, as of February 16th, even before winter storm Uri hit, there were five shipments for every available truck driver. In healthy operating conditions, a balance of two shipments for every one driver is considered healthy.
Industry analysts predict that supplies of many types of resin will remain tight through at least the first half of 2021. Some may not recover until the third or fourth quarter, with price increases expected to continue.
Options for now
One common way to handle resin shortages is to utilize alternate materials. Substitutes, however, may not be easily identifiable unless they are listed in the original product design print. Plus, even alternate resins that are generally easily to source are becoming more scarce as companies rush to implement them. There’s an overall scarcity across every grade of resin.
To help OEMs avoid a total shutdown, New Berlin Plastics works proactively with our customers to identify possible alternate materials to alleviate the supply bottlenecks many organizations are experiencing.
“We do the research to help our customers identify suitable alternatives that are available now,” business development manager Karl Held points out. “We provide the technical data and molding implications to help them make informed decisions. There are consequences when changing resins, so we are guiding customers to consider the least disruptive options.”
In certain cases, to further reduce risk to its customers, New Berlin Plastics has taken the extra step of warehousing additional resin inventory for materials that will continue being hard to source. This involves maintaining open communication with the company’s large network of distributors and compounders to tap into every supply base possible.
“Even though buying more resin than our customers’ forecasts requires is outside of our normal process, it’s better to hedge our bets where appropriate with current market conditions,” Held says. “Our goal is to help guide our customers through these shortages with as few disruptions as possible.”
As with many emergencies, unscrupulous sellers are popping up to take advantage of unsuspecting OEMs, offering suspect uncertified resins. “Never buy uncertified resins or from unknown entities. It’s not worth the risk of a potentially catastrophic failure later,” Held warns.
The big question on everyone’s mind is: When will things go back to normal? Some industry analysts forecast a bounce-back in resin supplies by mid-year 2021, while more conservative estimates predict that resin availability won’t return to normal until early 2022.
Protect against future shortages
There are limited options to address the current material shortage. But OEMs can take several steps now to prevent shutdowns in case of future shortages.
1. Use ASTM standards to specify materials
In a new product design print, it’s best to identify resins based on ASTM standards instead of specifying a particular resin brand.
“When an OEM specifies only one branded material without alternatives, they are painting themselves into a corner,” Mechery cautions. “By using ASTM standards, there’s a qualified family of products to choose from instead of relying on just one. It enables your molder to research resins based on availability and price and prevents you from locking yourself into a single resin that may become unavailable.”
For more information about the benefits of specifying ASTM standards for resin selection, read our blog post on this important subject.
2. Involve your molder earlier in the product development process
Engaging New Berlin Plastics early in the design phase can be the smoothest way to identify multiple resin options and reliable sources for those materials.
“When we work with OEMs earlier in development, we can suggest resin alternatives that are worth testing,” Held emphasizes. “With resins specified ahead of time, we have more time to investigate and order them to ensure we’re stocked and ready for production without any surprises.”
For more information about the benefits of engaging your molder early in the design process, read our article on this topic.
3. Expand your product delivery window
Set realistic timetables for product launches and marketing campaigns, recognizing that your ability to fill orders will be constrained by material and part availability for at least the next three to six months. The more visibility you can give your resin suppliers and molders, the better.
“As the events of last year have shown us, aligning yourself with suppliers who are able to react and respond effectively in uncertain conditions is invaluable,” Mechery states. “How well a supplier helps a customer through situations like these shows how critical good relationships are to high-performing supply chains.”
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