North American plastics processors have been dealing with extremely volatile resin prices in 2021. Polypropylene is up 68.5 cents per pound since December, most polyethylene grades are up 43 cents, and the list goes on. So who's absorbing the increases?
The quarterly results of publicly traded processors give us a pretty good clue.
In the latest round of earnings calls, processor executives have been talking about the impact that higher prices have on their companies' bottom lines, and the financial analysts have been asking a lot of follow-up questions about resin pricing. It's become an interesting dance, with the financial folks trying to pin down specifics, but the processors are obviously aware that customers are listening, too.
The answers vary, and everyone wants to highlight that their company is good at purchasing. But the ability to pass along hikes typically lags by a bit. There's no hard rule when it comes to resin pricing — as readers are well aware. But the lag can add up to a lot of money.
In Pactiv Evergreen's call, officials said the lag last quarter amounted to about $30 million. That's on sales of $1.35 billion.
For Berry Global, prices were up more than $500 million last quarter, and the lag in getting increases from customers amounted to $42 million. That was on quarterly sales of $10.2 billion — and company officials were quick to say they expect to get that back next quarter.
The flip side of this, of course, is that when prices fall, processors will be expected to give back the increases just as fast as they took them — if not faster. Never a dull moment in resin pricing.
Back in June, an "undercover journalist" from Greenpeace talked with a senior ExxonMobil about plastics, and the video (and response to it) has been generating headlines ever since.
Initially the highlight was on how the company had fared well during the Trump administration.
In the latest story, the focus is on plastic. The Hill writes that ExxonMobil sees plastic as a growing business and that an outright ban on plastic is probably not feasible.
It might be jarring to hear a company executive say those words, but are they surprising to anyone? Watching all of the resin company investment in new capacity, in the U.S. and globally, it's obvious that they think it's a growing business that isn't going to disappear.
We've been hearing for months about logistics problems getting product from China. Could that possibly be just the tip of the iceberg?
The Associated Press had an Aug. 5 story warning that a "perfect storm of supply trouble" could last into 2022, and they quote companies saying they are willing to pay higher prices to North American suppliers to avoid further disruptions.
"Companies that resisted moving production overseas now enjoy an advantage," the story says. "They don't have to wait for their products to cross the ocean — or figure out whether they can pass along to customers the import taxes that hit them at the U.S. border."
I've been asking North American plastics processors about reshoring for a long time. Anecdotally, a few have said that recently they aren't getting a lot of business back from China. But they do think it's becoming less common to have to compete for new business from China.
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August 09, 2021 at 07:30PM
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Kickstart: How well are processors passing along resin price hikes? - Plastics News
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