Record Plastic Prices May Go Stratospheric

Record Plastic Prices May Go Stratospheric
Record plastic prices are poised to push even higher.

(Bloomberg) -- Record plastic prices are poised to push even higher as a storm that’s forecast to evolve into a major hurricane bears down on the U.S. Gulf Coast region that manufactures almost 20% of the world’s ethylene.

Tropical Storm Ida is strengthening and by the time it slams into Louisiana on Sunday afternoon is expected to be packing winds of 115 miles per hour (185 kph). That puts chemical plants owned by Exxon Mobil Corp., Dow Inc. and others squarely in the bull’s-eye, threatening supplies of polymers used in everything from shampoo bottles to water pipes.   

Gulf Coast contracts for polypropylene, high-density polyethylene and PVC already are trading at all-time highs in the aftermath of a deadly February freeze amid brisk demand for consumer goods. 

Polypropylene, which is used in furniture, cleaning products and carpet, could jump almost 45% to $4,000 a metric ton if a significant amount of supply is taken offline for more than three weeks, according Jeremy Pafford, head of North America market development at data provider ICIS. 

“Long-term outages induced by tropical weather could fuel stratospheric price rises that downstream supply chains and consumers cannot easily afford,” Pafford said. “With the majority of U.S. commodity plastic resin capacity stationed on the Texas and Louisiana coasts, one devastating hit could bring months’ worth of polyethylene, polypropylene and/or polystyrene shortages.”

America’s petrochemical hub has spent much of this year trying to recover from extended shutdowns stemming from the February storm. The supply crunch was compounded by surging demand for manufactured goods and packaging. Global shipping constraints also hampered chemical supply chains, boosting prices. 

© 2021 Bloomberg L.P.

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