Customers of plastic materials are facing increasing prices and longer delivery times. NORAH Plastics is also experiencing the consequences of this. Read more about this problem and what it means for you as a customer in this article.

Since the beginning of this year, producers of finished plastic products have been experiencing serious bottlenecks in the supply of raw materials. This market disruption is occurring across Europe and unfortunately the problems seem set to continue for some time. It is expected that the market will only start to relax a little in the third quarter of next year.

Durable plastic materials such as packaging and transport systems are becoming increasingly expensive for a variety of reasons.

 

• Due to the corona pandemic, plastics producers have (temporarily) scaled back their production. Some companies experienced serious problems restarting production.
• The pandemic is also causing logistical problems in transporting plastics.
• The demand for plastics has increased in 2021, which also increases their price.
• Higher transportation costs, due to increased diesel prices.
  
  

Europe is a net importer of plastic raw materials, among others, and thus extra vulnerable to market disruptions. A country or region whose value of imported goods is higher than the value of exported goods is called a net importer. The current supply problems are particularly acute for bulk commodities such as polypropylene, polyvinyl chloride, polyethylene and propylene oxide. In the pharmaceutical and food supplement industries, these materials are better known as HDPE, LDPE, PP, PE, PVC and PET. A combination of reduced supply and increasing demand is the reason for these bottlenecks in the plastics market. In some cases, the amount of raw material available has been reduced to half the amount normally on the market. Depending on the type of plastic, this means that the basic materials cost about twenty to fifty percent more than they did in early 2021.

What's going on?
Raw material producers are facing competition from Asia, which has shifted much of the flow of raw granular plastic material from Europe to Asia. The shortages are therefore caused by an improving economy combined with exports of plastics from Europe to Asia. An additional disadvantage is lower production of plastics in the US and extremely high demand for certain raw materials used for protective articles against COVID-19. Importing raw materials or finished products from Asia is unfortunately not a solution because there is a shortage of containers heading to Europe. Long logistical challenges and increasing transportation costs are associated with this.

In short, it is a tremendously difficult situation for producers as well as for NORAH Plastics who need basic plastic materials for their daily business. Our biggest challenges are production continuity and long-term agreements with our regular customers. This is because the whole situation naturally also has an impact on customers who need plastic end products.