Plastics Commodity Report

With near-daily increases in the per-barrel price of oil, secondary plastics markets surely must be benefiting as a result. While supply and demand remain largely healthy, reprocessors are encountering difficulties when shipping their material offshore. And those same oil prices that make secondary resins more appealing to consumers are also making them more expensive to ship over the road to domestic consumers.

Generation remains steady, according to sources; however, a reprocessor in the Gulf Coast region is preparing for things to cool in the coming months. "For us it’s maintaining steady," he says of generation heading into the end of spring, "but we are keeping a close eye on the economy and do expect some reduction in the near future."

A reprocessor based in the South says he expects to see a slowdown related to temporary automotive plant shutdowns near the July 4 holiday. Currently, he says generation remains steady. While most of the company’s incoming material is from the automotive sector, its suppliers are not the domestic automakers, which have been having a difficult time in light of the current economy and the accompanying high gas prices.

In fact, generation has been so good in the South that the company has had to add new grinding capacity to keep up, according to the reprocessor.

Demand also has been healthy, most sources say. The reprocessor based in the Gulf Coast says his company is experiencing strong demand from domestic consumers, which is helping to nudge prices upward.

The Southern reprocessor says demand for polypropylene (PP) and high density polyethylene (HDPE) is strong. "ABS (acrylonitrile butadiene styrene) is always strong," he adds. "I wish we had more of it."

When it comes to post-consumer material, the Gulf Coast-based reprocessor says demand for HDPE has decreased, primarily because a large buyer has too much material in inventory.

A reprocessor based in the Southeast says he’s seeing a bit of a lull in demand heading into June, especially from consumers in the pipe and agricultural areas, markets that normally pick up this time of year. Instead, he says demand in these sectors is running three or four months behind. "The economy has everybody scared," he says, "A lot of the big sales are slowing down a little because they don’t know what to do."

Export demand remains healthy. The Southeast reprocessor reports strong export demand, even when buyers claim they are backing out of the market. He says export demand is thriving across a number of grades, especially post-consumer material.

Despite healthy export demand, obtaining containers to ship overseas orders remains challenging. "We rarely get 45-foot containers," the reprocessor in the South says. "We can get 40-foot containers, but it’s getting more difficult to line those up."

"Containers are tough to get right now, and freight prices are going up rapidly," the Gulf Coast-based reprocessor agrees, "but it has not really affected the flow of material for us."

The start of the produce season also means plastics are competing with produce for trucks for domestic shipments. Escalating fuel prices also are making shipping domestically a more costly proposition. "Fuel is going to kill everybody," the reprocessor based in the Southeast says, noting that escalating transportation costs are cutting into profit margins.