By Karen Hanna
Review your risk. Stay disciplined. Don’t panic.
That’s the advice from Michael Workman, director of business for research firm RTi International and director of growth for RTi subsidiary ResinSmart, 10 days after the start of a war that’s raised fears about global markets — including resin prices.
“For purchasers and processors, preparation is less about panic buying and more about discipline. This is the time to validate supplier claims, review lead-time assumptions, identify any single-source exposure and understand which materials are globally exposed versus regionally buffered. Companies that know their contracts, alternatives and true market benchmarks will be in a much better position than those reacting to fear,” Workman said.
Workman provided the advice March 9, a little over a week after Israel and the U.S. first began air strikes against Iran, touching off a regional conflict that threatens to close off the vital Strait of Hormuz and puts at risk global supply chains and energy resources.
For resin buyers in the U.S., which has ample domestic naphtha-based production, the immediate risk is price increases related to shipping disruptions. But, if the war drags on, it could also affect availability of resins, especially PE and PP. According to Workman, 37 percent of globally traded PE and 28 percent of PP originate in the Middle East. A few years ago, Iran shipped more than 3.3 million tons of PE, mostly to China.
“PET is also worth watching because ethylene glycol and other feedstocks tied to global trade flows can be affected,” Workman said.
Over time, because of less-direct supply and logistics pressures, “engineering resins could feel secondary impacts, as well,” he said.
He said resin issues begin upstream, as prices for oil have spiked well over $100 a barrel since Feb. 28.
Workman noted that the resin market was already tumultuous, “with a fragile mix of uneven demand, margin pressure and cautious buying ...
“The war adds a new layer of risk, but in our view the first-order effect is more likely to be higher energy and logistics costs, plus more aggressive supplier pricing behavior — to capitalize on the pricing momentum tied to risk, than an immediate across-the-board resin shortage in North America.”
He said resin purchasers might turn their business to other suppliers, moving from the Middle East to other regions, including North America, which could cause contraction in inventory from domestic sources.
Shipping disruptions in the Middle East will reverberate almost immediately, Workman said, “through delayed offers, withdrawn spot availability, higher surcharges and buyer hesitation.” Losses to capacity won’t be immediately felt, but could have more far-reaching consequences.
“Buyers should expect more volatility, less transparency in spot discussions, and a greater risk of opportunistic increase attempts tied to headlines rather than fully realized cost changes,” he said.
He advised resin buyers to proceed carefully.
“It is a market where procurement teams should be skeptical, data-driven and careful not to confuse geopolitical premium with true resin fundamentals.”
