The latest intelligence on resin buying

QCan you give us an overview of the industry at present?

AThe resin industry is going through a transition, just as we all are. With polyethylene, for example, currently close to 30 per cent of the North American production in 2009 has gone offshore. Domestic producers keeping inventory levels low here in North America have allowed them to push through some of the price increases we’ve seen most recently. In general terms, on the polyolefin side, we’ve seen the peak now with shutdowns in the summer; producers have slowed down their reactors, and we will see prices come off during the second half of the year. We believe we’ve seen the peak in resin markets in North America.

QWhat changes will be brought about by large capacities of Saudi Arabian resin coming on stream shortly?

AAs that production comes on stream, the 25 to 30 per cent of North American production that’s been going offshore is going to have to find a home here, and it will put tremendous pressure on the North American producer to rationalize this older production, in that it might not be quite as efficient as the new production. We’re going to see total reorganization of the producers, in that those producers that were domestic producers will now become global producers in joint ventures with Middle East countries.

QWhat will this mean for North American processors?

AIt’s an interesting time in that, as we’re seeing less opportunity for a producer in North America, there’s great opportunity that continues to present itself in Asia and the Middle East. As those reactors come on stream and go online, there’s new opportunities being presented to North American processors to look more globally for their resin supply.

QWhat’s your prediction for resin pricing trends in the next 12 months?

AWe’re not through the difficulties we have yet. Prices for resin are going to drop for the balance of this year, and then in the first and second quarter of 2010, when people start getting called back to work, we’ll see natural gas and oil prices increase, and then resin prices follow that. It may be difficult, but I think that it’s a positive indicator that we’ve turned the corner, and that our economy is going to change.

Q What are the main difficulties confronting processors today in sourcing their resins?

A The old saying that knowledge is power is very true here. My advice to clients is to know more than the person siting across the table from them. Understand what’s driving the resin prices, understand what the right price is for your business, and pay your bills on time. If you need 60 days to make payment, negotiate 60 days — but pay by day 59, because when a processor is negotiating, that’s what will give them an advantage and empower them with the supplier that they’re dealing with. What most purchasers in plastics processing companies don’t realize when dealing with a resin supplier is that they, the processor, are really selling themselves as being an advantage for that supplier to deal with.

QWhat general resin buying advice would you give today’s plastics processors?

AMore than ever, it’s important to know what’s impacting your resin price when you’re about to make a purchase, to understand what the markets are doing, and what that producer’s position is in the market. How does he fit? Is he a low cost producer, does he have extra production, is he financially struggling himself? These are key things to understand when you’re sitting down to negotiate.

For the complete interview with Bill Bowie, check out https://www.canplastics.com/video/episode31.asp