Since the start of this year, manufacturers of finished plastic products have been experiencing severe bottlenecks in the supply of raw materials. This market disruption is occurring across Europe and, unfortunately, the problems look set to persist for some time yet. The market is not expected to ease until the third quarter of this year.
Europe is a net importer of, amongst other things, plastic raw materials and is therefore particularly vulnerable to market disruptions. A country or region where the value of imported goods exceeds the value of exported goods is referred to as a net importer.
The current supply issues are particularly evident with bulk raw materials such as polypropylene, polyvinyl chloride, polyethylene and propylene oxide. In the pharmaceutical and food supplements industries, these materials are better known as HDPE, LDPE, PP, PE, PVC and PET.
A combination of reduced supply and rising demand is causing these bottlenecks in the plastics market. In some cases, the available quantity of raw materials has fallen to half the amount normally found on the market. Depending on the type of plastic, the cost of raw materials is therefore around twenty to fifty per cent higher than at the start of 2021.
What is going on?
Raw material producers are facing competition from Asia, which has shifted a large proportion of the flow of raw plastics from Europe to Asia. The shortages are therefore caused by an improving economy, combined with exports of plastics from Europe to Asia. An additional factor is lower plastics production in the US and extremely high demand for certain raw materials used in protective equipment against COVID-19.
Unfortunately, importing raw materials or finished products from Asia is not a solution, as there is a shortage of containers bound for Europe. This is accompanied by prolonged logistical challenges and rising transport costs.
In short, it is an extremely difficult situation for manufacturers who require basic plastic materials for their day-to-day operations. Their biggest challenges are production continuity and long-term agreements with customers. This is because the whole situation naturally also has an impact on customers who require finished plastic products.
