Major companies such as Dow and Exxon Mobil have begun to increase plastic prices, in light of increasing pressure on supplies as a result of the current situation.
Dow announced on Monday that it will raise prices for polyethylene resins for North American buyers at least through May, according to a document seen by Bloomberg. This includes an increase of 30 cents per pound in April, with a plan to add another 20 cents per pound the following month.
Last week, Exxon and Nova Chemicals also agreed to increases in April of 30 cents per pound, instead of the 20 cents previously proposed, according to documents seen by Bloomberg. An Exxon spokesman declined to comment, while spokesmen for Dow and Nova did not respond to requests for comment.
This move comes after the rise in petrochemical prices in the United States, as a result of the virtual cessation of shipping traffic through the Strait of Hormuz, through which about a fifth of the world’s oil and liquefied natural gas supplies passed before the current situation.
These energy products are essential materials in the plastics industry, and as supplies decline, the high cost begins to be passed on to consumers. According to one buyer, polyethylene prices are now more than double their pre-event levels.
Pressures appear greater in Asia and Europe, which depend more on Middle Eastern supplies than North America. Other key plastics have also become more difficult to produce as costs rise, prompting some suppliers to suspend shipments and raise prices.
The impact extended beyond plastics, as INX International, a company specializing in the manufacture of inks and coatings, announced that it would raise the prices of solvent-based inks by 13 percent and solvent-based coatings by 10 percent, effective May 1, according to a letter seen by Bloomberg. The company attributed the decision to the high cost of materials, energy and transportation due to geopolitical unrest, including conflict in the region.
Even with the reopening of the Strait of Hormuz, supplies are not expected to quickly return to normal, after production declined in major oil and gas fields, refineries slowed down or stopped their operations, while some petrochemical plants were damaged. This means that the cost is likely to remain high, and that plastic prices will not decrease soon.
Dow CEO Jim Fitterling said last month that it could take up to nine months for flows from the Arabian Gulf to return to normal levels after the reopening of the strait. (Bloomberg)
