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, one after another: A freak winter freeze in Texas. A lightning strike in Louisiana. Hurricanes along the Gulf Coast.
All have conspired to disrupt production and raise prices.
“There isn’t one thing wrong,” said Jeremy Pafford, head of North America, market development, at Independent Commodity Intelligence Services (ICIS), 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.
It's hard to know when all the various pandemic-related supply chain issues will be over.
The negative effects are obvious, i.e. if you can't get product, you can't sell it and your revenue projections go down, so you dial back hiring.
It seems that there hasn't been a major impact on hiring yet, especially for the companies that do the bulk of hiring out of graduate school. That said, it bears watching, and I think it poses the largest obvious threat to the 2022 chemical employment market. Developing...
I have a feeling that a LOT of the important players responsible for these price surges are enjoying the price hikes and the pessimist in me is worried that those prices will not ever reduce. Most concerning to me is lumber, but man I hope I'm wrong.
ReplyDeleteim more optimistic about it; all it takes is one vendor to drop the price to gain more share, and the market will be back to "normal." though im also slowly losing faith in graphic cards..
DeleteYeah, most chemical companies reported record profits in Q2 and were running their plants to capacity. As for pricing increases those I believe are being passed through the supply chain and ultimately the end customer should really feel it next year. I'm waiting on the Q3 reports to come out (should be this week/next few), but I think the profits will still be there, however next year we might seem some decline due to high prices.
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