Katrina could send resin, material prices upward in Canada

Canadian plastics processors could feel the impact on their bottom lines as the disruptions to transportation and energy supplies left in the wake of hurricane Katrina hit resin suppliers.

According to reports, several major refinery operations have been disrupted, either shutting down or have had production severely reduced. At press time, the refinery operations of ExxonMobile, ChevronTexaco, Motiva, Shell and ConcoPhillips in Louisiana had been shut down. Producers of resin and raw materials as polypropylene, mixed xylenes, styrenes and polyethylenes were also reporting operation being shut down or severely reduced.

Transportation of materials have also met a similar fate, with roads and rail lines being cut off caused by the extensive flooding and damage in New Orleans and surrounding areas. Power outages were also reported in many areas.

All this, according to analysts, will likely send resin and material costs upward for plastics processors in Canada.

Michael Greenberg, chief strategist with the Chicago, Ill.-based The Plastics Exchange expects to see price increases for resins because of Katrina.

Greenberg added the disruptions would add additional upward pressure on already increasing resin prices. For example, there was a six-cent increase for polyethylene in the months between May and July of this year, and another six-cent increase went into effect at the beginning of September. And before the hurricane struck, there was an announcement that a possible seven-cent increase was likely in-line for mid-September.

“Before the hurricane, there was a 10 to 15 per cent chance for that seven-cent increase for polyethylene,” Greenberg said. “Now I would say there is a 75 per cent chance for that increase and for further increases. And we might see a 50 to 60 per cent increase in the price of resins from its low point in mid-June because of this.”

Beth Daniel, U.S. editor, Plastics, for the Houston, Texas-based ICIS, an information provider for the chemical and oil industry, said it is still too early to predict the exact fallout of the hurricane.

“There are indications that (resin) prices are going to go up,” Daniel said. “A few companies have announced increases in October immediately after the hurricane. I expect that producers intend to recoup the cost of production outages caused by the hurricane.”

Daniel does not expect consumers to see any upward spikes in the prices of plastic goods or products similar to the sudden upsurge in automotive gasoline prices the day after the hurricane. She said many plastics processors stocked up on resins and other materials earlier in the year as prices for those materials began to increase.