In an economy upended by the coronavirus, shortages and price spikes have hit everything from lumber to computer chips. Not even toilet paper escaped.
Now, they’re cutting into one of the humblest yet most vital links in the global manufacturing supply chain: The plastic pellets that go into a vast universe of products ranging from cereal bags to medical devices, automotive interiors to bicycle helmets.
Like other manufacturers, petrochemical companies have been shaken by the pandemic and by how consumers and businesses responded to it. Yet petrochemicals, which are made from oil, have also run into problems all their own such as a freak winter freeze in Texas and hurricanes along the Gulf Coast.
All have conspired to disrupt production and raise prices.
“There isn’t one thing wrong,” says Jeremy Pafford, managing editor for the Americas at Independent Commodity Intelligence Services, which analyzes energy and chemical markets. “It’s kind of whack-a-mole—something goes wrong, it gets sorted out, then something else happens. And it’s been that way since the pandemic began.
The price of polyvinyl chloride or PVC, used for pipes, medical devices, credit cards, vinyl records and more, has rocketed 70%. The price of epoxy resins, used for coatings, adhesives and paints, has soared 170%. Ethylene—arguably the world’s most important chemical, used in everything from food packaging to antifreeze to polyester—has surged 43%, according to ICIS figures.
The root of the problem has become a familiar one in the 18 months since the pandemic ignited a brief but brutal recession: As the economy sank into near-paralysis, petrochemical producers, like manufacturers of all types, slashed production. So they were caught flat-footed when the unexpected happened: The economy swiftly bounced back, and consumers, flush with cash from government relief aid and stockpiles of savings, resumed spending with astonishing speed and vigor.
Suddenly, companies were scrambling to acquire raw materials and parts to meet surging orders. Panic buying worsened the shortages as companies rushed to stock up while they could.
The problems in the petrochemical supply chain have been compounded by shortages of labor and shipping containers and by overwhelmed ports. Some Asian ports have been shut down by COVID-19 outbreaks. U.S. ports like the one in Long Beach, California, are struggling with backlogs of ships waiting to be unloaded and Louisiana ports have been operating below capacity since Hurricane Ida. Read the full story