Resins Industry Navigates Choppy Waters

The resins industry has been on a rollercoaster ride in recent years, facing headwinds from supply chain constraints, global economic uncertainty, and geopolitical tensions. While demand is slowly picking up, rising shipping costs and volatile crude oil prices are creating new challenges. As a CPO, how prepared are you to navigate these challenges and unlock the potential of sustainable energy procurement?

A Rollercoaster Ride

In 2021, resin prices soared due to tight supply and robust demand. But the tide shifted dramatically in the second half of 2022, with prices plummeting over 30% across major markets as a result of the global economic downturn, rising interest rates, and recession fears.

2023 saw a relatively stable market with prices remaining range-bound. However, the first quarter of 2024 brought renewed demand pressure, fueled by inventory restocking in the US and EU, and lunar new year restocking in APAC. Coupled with geopolitical escalations, particularly the Red Sea crisis, this disrupted shipments from Asia and the Middle East to Europe. Shipping costs skyrocketed by over 178% between Q4 2023 and Q1 2024, adding further pressure on margins.

Key Risks on the Horizon

• Volatile Crude Oil Prices: Geopolitical tensions are likely to keep crude oil prices volatile, impacting the cost of olefins, a key raw material for resins. While olefin prices have historically tracked crude oil prices, polymer demand remains lower, leading to sustained margin risks.
• Increased Lead Times: The Red Sea crisis could lead buyers to build safety stocks, but the current economic environment and abundant supply may limit steep price increases.
• Spot Market Volatility: Keep an eye on spot market prices, which can serve as a leading indicator of short-term price movements, particularly during periods of supply disruptions or unforeseen events.
• Potential Trade Restrictions: The ongoing geopolitical tensions could escalate, leading to trade restrictions, similar to those seen with PET and other chemicals from China to the US and Europe.

In addition, the market faces medium-term risks due to rising freight and production costs, with underlying supply and demand continuing to be subdued. Margin pressure is likely to persist, and plant closures in Europe are anticipated in 2024.

How Beroe Can Help You

Beroe provides essential support for businesses operating in this challenging market. Our expertise can help you:

• Navigate Market Volatility: Leverage Beroe’s market intelligence and analytics to understand the key price influencers and make informed decisions.
• Optimize Procurement Strategies: Beroe’s deep understanding of the resins market, coupled with our global network of suppliers, can help you secure cost-effective sourcing options and diversify your supply base, mitigating risks and securing greater value.
• Mitigate Risks: We can help you assess potential risks, develop contingency plans, and navigate trade restrictions, ensuring business continuity and stability in your supply chain.

Partner with Beroe and stay ahead of the curve in the resins industry.

Contact Beroe to discover how we can help you achieve procurement excellence.