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Industry Group Says Elevated Prices and High Operation Rates Likely in 2022
December 28, 2021

As US industrial production of plastics products manufacturing is expected to end 2021 higher, US resin prices could still remain elevated at least into the first half of 2022 with potential for plastics material and resin manufacturing utilization rates to expand, according to the Plastics Industry Association (PLASTICS).

Low plastics material and resins supply brought on by the COVID-19 pandemic and Winter Storm Uri in February caused the plastics product manufacturing to slow. Although resin production rebounded after May the industry group notes that the plastics industry continues to face labor shortages.

PLASTICS data also shows that plastics production has been high to meet stronger demand for plastics and plastic products. In November, plastics production was up 7.1% from a year earlier. Compared to the end of the COVID-19 recession in April 2020, plastics products manufacturing has risen 23.0% and is expected to see a 4.5% increase in plastics production in December year-on-year.

Meanwhile, plastics and rubber shipments have also increased since February 2021. The latest estimates from the US Census Bureau showed shipments increased 7.5% in October from a year earlier to $22,019 million. And assuming favorable business conditions in November are unchanged in December, PLASTICS estimated 2021 could close with shipments 9.5% higher than December last year.

The increase in 2021 production and shipments came alongside a double-digit increase in resin prices. Polyethylene and Polypropylene commodity grades, especially, were among the resin markets that saw record highs earlier in the year.

"While the causes of resin shortages have been analyzed by many industry observers, strong demand for plastics and plastics products sustained elevated prices throughout 2021," said PLASTICS Chief Economist Perc Pineda. "However, data suggest that resin prices peaked in the summer months

Pineda added that it remains to be seen when prices will return to their pre-pandemic levels but given that supply chain issues could remain unresolved—at least in H1-2022—resin prices could remain elevated, while the rates of increase continue to moderate as resin supply catches up with resin demand.

Sustained elevated prices may also come alongside an increase in utilization rates in 2022, suggested Pineda. Plastics material and resins manufacturing capacity utilization rates averaged 88.0% in 2019 and 2020, but 2021 could see that rate average lower, at 83.1%, based on PLASTICS data as supply continues to adjust.

The lower utilization rates were prompted by the pandemic, but Pineda said adverse weather had a larger negative impact on capacity utilization than the pandemic.

Plastics and rubber shipments have also been increasing since February of this year. It increased 7.5% in October from a year earlier to $22,019 million, according to the latest estimates of the U.S. Census Bureau. Business conditions remained favorable in November and assuming that's unchanged in December, this year could close with shipments 9.5% higher than December last year.

By Brian Balboa for The Plastics Exchange.

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