Plastic prices are increasing and it is happening across the board. Virtually all plastic products are affected from plastic bottles to automotive components. This includes all grades of plastic from low density to high density. The price increases are due to tight supplies of polypropylene resin which is the base material all the plastic product manufacturers use to fabricate plastic. In January the price index was reported to have an average increase of $.05 cents per pound. Plastic prices have increased again in February. Plastic product price increases for the end user tend to double or even triple from what the raw material supplier charges.
The reasons for the shortages appear to be related to higher consumption in November and December of 2012. There were also some outages at North American ethylene feedstock production sites. Inventories dropped significantly in January and the supply chain is now playing “catch-up”
The plastic resin shortages were largely unforeseen as many suppliers were taken by surprised. Several of Packnet’s plastic suppliers have increased prices 2 times since the first of the year. These price increases are resulting in at least a 10% higher cost of corrugated plastic so far this year.
At this point, we don’t see this as a long term shortage issue, but no one is promising us the situation will reverse in the short term. As always Packnet will utilize all its available options in managing supply chain issues. Some corrugated plastic products from Packnet may reflect the higher material cost.