What's driving up the prices of plastics?

It isn't just the common products customers buy that are in short supply; so too are the plastic packages that hold those items, as the key material used to manufacture plastics is difficult to come by and is contributing to rising inflation. 

That material is resin. A synthetic polymer that is a byproduct of petroleum, resin is a uniquely important building block of many different plastics, varnishes and adhesives. But due to the freak ice storm that struck Texas in February — which led to massive blackouts and interrupted oil production at area refineries for several days — wild weather has led to severe supply chain disruptions. Plastics manufacturers have since stockpiled what resins they have to compensate for volatility in supply and pricing and to guard against the possibility of refineries going offline again during hurricane season. The Atlantic hurricane season just recently ended, running between June 1 and Nov. 30.

Given the fact that resin is in such short supply, prices have skyrocketed. Indeed, the Producer Price Index for plastics material and resins manufacturing reached nearly 381 in May, up from 249 a year earlier, according to Bureau of Labor Statistics data put together by Supply Chain Dive.

PET is the type of plastic used in water bottles.

But it isn't just resins — and by extension, plastics — that are harder to find. So too are several other key commodities. These include adhesives and paints, corrugated packaging, electrical components, foam, steel and printed circuit board assemblies as well as semiconductors, according to the Institute for Supply Chain Management. And many of these commodities have been reported as scarce for a number of months, including eight now for resin and 13 months for electrical components. As a result, the prices for these materials have risen consistently on a month-over-month basis. Of the dozens of commodities the Institute for Supply Chain Management tracks, only wood experienced a price reduction in October.

PET prices are also higher 
As far as types of plastics are concerned, Polyethylene Terephthalate, or PET, is a major pain point for businesses that rely on the material, such as bottling companies. Not only have limited quantities driven up the cost of PET, but so have the duties that exporters charge. International Bottled Water Association President and CEO Joe Doss told Supply Chain Dive that the duties on PET originating from China are currently $1.80 for each dollar of imported goods.  

The challenging PET market traces back to the resin shortage and where the material is overwhelmingly manufactured. According to Ferriot, 85% of the nation's resin used to develop plastic comes from Texas, the state that has been on the receiving end of wild weather, including Hurricane Ida in August.

Sudeep Suman, director at Alix Partners, told Supply Chain Dive that he anticipates resin supplies level to remain slim for the foreseeable future, at the very least into 2022. He added that there do seem to be some modest improvements occurring, with supply and demand for the material starting to balance out, albeit slightly