Canadian plastics processors uncertain about future, feel cost crunch from rising materials costs

The shortage of materials and increased resin prices are hitting Canadian plastics processors where it hurts the most — right in the pocketbook.

The bottom line is not the only thing affected. Many processors are changing the way they do business to compensate for shortages and increasing costs.

A survey of plastics processors at Canadian Plastics’ 10th Annual Resin Outlook conference in Mississauga, Ont., on Oct. 6, 2005, showed while the majority of plastics processors are still able to get some or all of the resin they need, many are receiving reduced quantities. Processors also lack confidence in future supply.

Eight of the 19 processors that responded to the survey said they so far had no problem getting the resins they needed. Four said they were able to source the materials they needed, but with difficulty, or at a significantly higher cost. Five said they were able to source resin, but only at a percentage of what they required. Only one processor responded with an outright ‘no’ to the question.

“We are able to get all our LDPE (low-density polyethylene) and LLDPE (linear low-density polyethylene), but HDPE (high-density polyethylene is impossible at this point,” said a film extruder in Ontario that produces consumer retail garbage bags and packaging, and who wished to remain anonymous.

HDPE was the resin most commonly used by the processors surveyed. Of the PE variants, 12 used high-density PE (HDPE), three used low-density PE (LDPE), two used linear low-density PE (LLDPE) and one just indicated PE.

Calgary-based Flexpipe Systems Inc. uses HDPE in its blow molding, and pipe and profile extrusion processes. So far, Flexpipe said it has been able to source the HDPE it needs, but supply is tight.

“[There have been] no major impacts yet,” the firm said. “Currently we have had to source other supply options because we have been put on allocation. The only impact is that we are unable to build as much buffer stock as we wanted.”

IPL Inc., in Saint-Damien, Que., is an injection molder, and pipe and profile extruder that produces packaging as well as products for the automotive market. The company uses HDPE, polypropylene (PP), acrylonitrile-butadiene-styrene copolymer (ABS), nylon and polycarbonate (PC) but has only been able to source about 85 per cent of the resin it needs.

As a result of the lower inventories of PP and PE, and three price increases since August, IPL is considering switching to a different material, an off-grade or a different grade, said the firm’s Jean-Paul Chasse.

An Ontario-based film extruder that makes packaging is also changing the way it does business to compensate for higher costs and dwindling supplies. The firm is able to source resin, but in reduced quantities, it said.

“Due to several resin companies declaring Force Majeure and others on order control, it has indeed affected the availability of resin. We too have announced order control to our clients. In view of this and resin prices quickly escalating, we are passing on all [cost] increases,” the company, who wished to remain anonymous, said.

Even firms that have been able to obtain all the resin they need are uncertain about the future.

North Safety Products in Anjou, Que., is an injection molder of personal protective equipment using HDPE.

“So far, the only impact is on cost,” said NorthSafety’s John Beausejour. “The supply chain is still secure but we do not know for how long.”

And a sheet extruder and thermoformer of outdoor and sporting goods and toys, using HDPE, is not feeling the impact yet, but is concerned about feeling the crunch in January 2006.

“As our business is seasonal, the real impact will occur in January 2006 if the price of HDPE stays as it is now,” the company, who wished to remain anonymous, said.

Aside from PE variants, eight respondents were using polypropylene (PP), five were using polyvinyl chloride (PVC) and five were employing acrylonitrile-butadiene-styrene copolymer (ABS) for their processes.

Only three were using nylon. Similarly three processors were using polycarbonate (PC), while two were using polyethylene terephthalate (PET) and two were using other engineering resins.

An Ontario film extruder and thermoformer that produces packaging said it is having difficulty obtaining the PET and PS it needs.

“Prices for both PET and PS have gone up dramatically,” said an Ontario-based extruder, which chose to remain anonymous. As a result, the company is seeing significant compression in its margins.

Bolton, Ont.-based Teknaform Inc., a maker of PVC furniture, is worried that the cost of resin might lead them to lose customers.

“We have just been advised of a seven per cent price increase and a 30 per cent cutback in availability,” said the firm’s Keith Carrol. “Our plant runs full-out to supply our customers; we are having to reduce our sales by 30 per cent and run the risk of losing customers for the long-term.”

And Teknaform isn’t the only company worried about losing customers.

“Allocation of resin to our manufacturing plants has given us concern on how to service our customers. We are looking for alternative supply and product type, [and we are] uncertain of future supply over next two to three months,” said another PVC processor in Ontario, who chose to remain anonymous.

The majority of processors that responded employed multiple plastics processing methods. Eight of the processors were injection molders, five were pipe and profile extruders, four were thermoformers, four were film extruders and four were blow molders. One processor was a film extruder, one was involved in the lamination of films, one indicated extrusion and one other also processed thermoset resins.

The processors manufactured products for a range of industries including building products, horticultural products, toys, consumer goods, automotive and transportation, to name a few.

Eleven of the respondents came from Ontario, seven from Quebec and one from Alberta.

Stay tuned for the December 2005 issue of Canadian Plastics, which will include a more in-depth look at resins pricing for the coming year.