The Personal Impact of Rising Resin Prices

Perhaps when you listen to the news you hear "blah, blah, blah, resin price increases, blah, blah, blah."  Well, after today, you may hear this bit of news a bit differently. This isn’t exactly something that you would expect to see in the mainstream news, but you will get the info here because it’s important to your ability to be aware and be prepared.

The cost of resin has been escalating dramatically since the first of this year. For those of you who don’t know, resin is a big part of your life. It’s necessary for the production of all things plastic. This includes pipes, storage bins, buckets, kitchen tools, road markings, construction supplies, general household and kitchen goods, automobile parts, toys, DVD/CDs, waxes, medical adhesives, product packaging, etc. This means that not only are these items increasing in costs but so are all of the products that are packaged in plastic such a wheat, milk, yogurt, juices, etc.

The resin price increase began about two months prior to Chinese New Year (February 14th) as China began to buy up a great deal of resin in order for them to produce their trinkets, toys, and other necessary celebration items.  The rise has continued with three significant  increases since the first of the year.  The demand was brought about because of the Chinese New Year orders were in addition to China’s standard hefty resin purchasing for all of the kinds of items which I mentioned previously. Unfortunately, this surge in demand, combined with all of our other export demand, our own consumption and some serious production glitches have caused an imbalance between the supply and demand—resulting in some very uncomfortable price increases. In fact one key producer refers to resin now as “extremely expensive stuff”.  (Yes, stuff is apparently a technical term in the world of resin production.)

The production glitches?  The production of plastic products is reliant upon vital equipment known as steam crackers. Steam crackers are usually located near oil refineries. Unfortunately, there are very few steam crackers in existence in relation to refineries (500 refineries compared to only 42 steam crackers).  The simplified explanation is that steam crackers take natural gas liquids and convert it to ethylene and propylene (petrochemicals) which we require in order to manufacture the resin pellets and consequently the plastic goods. The natural gas liquid is fed into the steam cracker and the cracker heats up the natural gas liquid and thus “cracks” the molecules and olefins.  Once the ethylene and propylene is produced, it’s piped into a reactor and converted into resin pellets. As you may know, the oil refineries ideally need to be running 24/7 in order to put out the amount of fuel we consume at a tolerable cost. That cost is dramatically increased however, if one or more of the refineries breaks down or the operation is interrupted.  The consequences are that fuel prices escalate. The same scenario holds true when it comes to any interruption in the functionality of the steam crackers.  If the crackers don’t produce their maximum output, then it has an impact on the cost as a result of imbalanced supply and demand. With such a strain on existing production, the fact that many skilled maintenance workers were laid off and some plants were shut down (such as Dow Chemical Company in Midland, Michigan) as a result of the economic crisis does not bode well. Ultimately the consequences are a limited amount of resources to keep the crackers operating properly in order to attempt to keep up with demand. Whew! How’s that for a behind the scenes explanation?

Initially the price increases were taken on by the wholesalers anticipating that it was just a temporary cut of their profit margins. However, after the third increase before April of this year, many were no longer able to handle the increase cost and had to pass it along.  In early February, many resin sellers were imploring buyers to buy their May orders on a set contract in order to lessen the cost impact. Due to the economic stage though, few buyers were in a position to do so.  Some even felt that the manufacturers were simply crying wolf in a ploy to bring in additional cash during tough times—as that is standard in virtually any industry, right?. Many seasoned buyers were taken by surprise when the price increases continued, claiming an unprecedented problem of narrowing supplies.

To complicate matters, the U.S. has an onus to take good care of China and other nations who hold a sizeable investment of our foreign debt. China and Japan, who own 25% and 24% of all of our foreign debt respectively, interpret slow turn times and unfulfilled orders as a sign of a weak economy, thus making them a bit nervous in holding so much of our debt. While there is a reality of the narrowing supply of ethylene and propylene monomers (consequently polypropylene), it’s important that the U.S. maintains a good economic game face when selling to their heavy foreign investors. Call it preferential treatment to keep a key customer. The U.S. tends to bend over backwards to meet such demands in order to put forth the impression of a healthy manufacturing market, as opposed to a scarce one.  As a result, the U.S. sells what they’ve got to these critical relationships leaving what’s leftover for us.  (Reminds me of how teenagers act when their friends become more important than their family. Hee hee) Thus our supply of resin has diminished dramatically making the price higher due to the good old fashion consequences of supply and demand.

That’s not the whole of it either.  If we aren’t able to export a sizeable amount of China’s resin requests, then their own market security is compromised. Ironically, all of those “made in China” items begin with the resin we produce here in the U.S.  Because of our financial ties, we’ve ensured that we price our resin to them at better pricing than they could obtain from other, closer suppliers This is the exact same scenario that caused the U.S. to deplete our “just in case” supply of wheat. China was clamoring to purchase it in light of serious drought conditions and increased population. We sold it to keep peace in the family. If China’s economy takes a serious hit because of a lack of resin to produce some of their primary exports, then they are no longer able to purchase our foreign debt. See the vicious cycle?  The U.S. is already way behind its necessary debt sell rate for 2010 by nearly 500 billion dollars—nearly 1/6th of the entire amount it needs to sell this year.  Holding back resin in order to appease our own domestic demand would consequently be throwing fuel on a much larger fire—at least in the minds of the powers that be.

As a way to make all of this news a bit more real to my own world, I took the initiative to interview five national retailers regarding their bucket prices.  No surprise, all of them confirmed that, yes, they have experienced a hike in plastic goods pricing—anywhere from 7% -32%!  Five Star Preparedness owner, Scott Bishop, stated that he’s seen 4 price increases in the square buckets he offers just in the last three months, impacting his bottom line by approximately 12% on the wholesale side of pricing.  That’s pretty steep when you realize that resin is simply ONE component of the world of plastic manufacturing.

So what are we left with?  Well, we’ve provided China with as much resin as we dare. In spite of which, their needs are still not satisfied, so they are having to resort to using the more expensive local and Middle Eastern options for resin supplies. This has an unpleasant domino effect causing the resin based imports that we receive from China to increase significantly. This also means that our own supply of resin is critically low and thus everything that is connected to this will increase in price as well.

Let’s see. What does this all mean to you?  The same as it always does. Just because you don’t see all that goes on behind the curtain doesn’t mean it’s not there, right?  Take time to be methodical and strategic in your acquisition of necessary supplies which will ensure your independence on a rainy day.  Personally, instead of waiting until I’m in an organizing mood, I intend to keep a sharp eye out for storage bins and the like and get them when they are on sale rather than waiting for the mood to hit me. I also intend to be more diligent in acquiring items that are packaged in plastics or that are heavily reliant on plastics as I don’t see a cure for this imbalance anywhere in the near future.  Some financial experts believe that the pricing will settle down in May, but that doesn’t make a whole lot of sense to me.  The snag is that unless you’re a commodities trader, you won’t see an immediate impact because the products have already been manufactured with the more expensive resin since the first of the year. So until the manufacturers can sell through that inventory, they won’t be able to pass on the improved pricing, and by then, the prices could come back up or exceed where they are presently.  We’re not going to be creating any new crackers anytime soon, right? We’re still a bit behind on China’s desire for resin—and that’s just one customer.  Plus, our technology is constantly increasing in the use of plastics over other more expensive commodities. AND you’ve got the wholesalers who have already invested in the pricier resin who will have to sell through that stock before they could take advantage of the supposedly lower priced goods at the end of May. By that time, a whole lot could happen and the recovery could be swallowed up by another natural disaster or another oil spill accident.  So, for me? I’m not going to gamble on things getting better in this regard. Rather, I’m going to be more diligent in taking advantage of this awareness and acting accordingly.

Peace in preparedness, folks.

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Comments

It's all coming true from your prediction. I don't consider you a seer or a prophet it's just a simple straight line projection of supply and demand. Gosh prices are starting to spike on food. A big/noticible increase in the last month. Sugar prices crept up over a year. Now big spikes are happening and it's right now.
I wonder about all the folks that poo-poo your coupon class before, will find a new motivation to try it out. Or your look at food and commodities. I don't think many folks will relize how wrong you wanted to be in forcasting or simply recognizing the data from the harvest.
Well I'm doing what I can to go cheap. I can't do cellfire I have no cell phone. Go to Fred Meyers sirloins for $1.99 per pound it will probably go up to $3.50 or mor per pound on Sunday the 16th of May.

Preparedness Pro's picture

Jamie, you don't need a cell phone to use cell fire. You can punch in any phone number you desire. You can have the coupons loaded to your rewards card instead of a phone.
Good luck!

Well I hate to disagree but My phone number is not considered a cell phone number. I use Magicjack as my main phone. Cellfire does not like it. It's ok if they don't want me, I don't want them. Both of the othe sites worked with no problem

Preparedness Pro's picture

Bummer. I've never had a problem using my non-cellphone number.

Gosh it's happening. I watch the price of food pretty close, but also month to month. Food is spiking upwards not counting all of the nonsence from the government that inflation is low. Excluding food and fuel. The US gov. may not need those items but everyone I know needs food and fuel.
Let's say 20% rise on average and it will only get worst with the policies in D.C..
Doggone you are right Kellene. I so hoped we'd to be wrong. Well there are still sales and coupons I hope. Gosh I preppared but I really hoped I was wrong. Our leaders have college educations from good schools. Gosh how can they be so smart and learn so little?

This is another example of Preparedness Pro leading the way in educating us on the WHYs and HOWs and What To DOs to be as prepared as possible. This one snuck up on me; I had no idea that resin supplies were at risk. Just think how many others aren't aware and will fail to act on what could be substantial savings on plastic products now. Stores like the Dollar Store will no doubt be significantly impacted as so much of their merchandise is plastic made in China. I personally try to avoid purchasing anything that is made in China (although nearly an impossibility in some areas) since there have been so many safety and quality issues. Unfortunately finding "Made in the USA" stamped on an item is a rarety these days.

well certainly worth trying out. I lost nothing, I did not have cellfire before you told me about it so I lost nothing. If it works for others great! Maybe it's just me and my number they don't like worth trying to get.

Thanks for this information. This is one that I had not heard of. Each month, my income covers less and less. I knew about the food shortages coming. This terrible mess in the Gulf of Mexico is going to cause a huge ripple effect on just about everything.

Having this kind of heads up helps in making decisions about what to work on next.

Thanks again.

You are definitely the local Guru! What an eye opener! Time to keep an eye out for buckets on sale. I need some!

This means that the price on Peanut Butter packaged in those nice plastic jars will be going up. :*( At least we get another use out of them by putting homemade freezer jam in the empty jars. Our kids go through a lot of both!

Thanks for the heads up on this domino effect.

This might explain why I can't find any local stores who are willing to give away plastic buckets. I've tried asking several places such as the local bakery, coffee shop and even grocery stores. They say they now send the buckets back and can't sell or give them away. Any ideas where I might be able to buy some low cost plastic 5 gallon pails to use for container gardening? Thanks!

Preparedness Pro's picture

Five star preparedness still has reasonably cost buckets.

Wow. Who knew. I am off to go bin and bucket shopping before those prices increase even more. I'm looking for a good sale too. Wish me luck. ; D

I'm amazed when I read some of the comments on preparedness sites, at how many people are totally surprised with the information presented. Everything you want or rather need to know is available on the web. You just have to be willing to dig for it. It's the ultimate in self sufficiency...not waiting for someone to spoon feed you information, which is an incredibly irresponsible and dangerous practice. I want to be responsible for educating myself and taking nothing someone else presents as 'gospel' at face value. I'm no longer surprised when I run across information passed through someone's personal filter, that is biased, and has a spin to it. I question, what are they trying to sell, what is their personal agenda, what do they have to gain by promoting this position. We who claim to be into preparedness need to walk the walk.

As usual.....right again....I am so happy that I took your advise last year when I first found you. I have been really stocking up on the food for the past year, plus buying freeze dried foods,stocking grains etc. Then I started buying waterjugs...WOW! The price has gone thru the roof not to mention buckets. As usual I will take your advise and buy what I need now. You have never let me down. You are a very smart lady!!!!!

Haven't heard of this one. Thanks for the tip! I will be making a trip to the store for some buckets now. And BTW, I do spend a lot of time on the web studying preparedness, but there is not enough time in the day to learn everything there is to know. Thanks for all your help Kellene!

Will be looking for buckets and tubs on sale. Hadn't heard about this shortage. thanks for the info.

Great info and advice! I can't imagine the amount of research and work you put in. I immediately gave a "green light" for all resin related purchases pending (water barrel, storage containers, etc.). As I began shouting this order over my shoulder, I realized that I live alone... Guess I'll grab the truck keys... God Bless You for sharing with us Kellene.

Preparedness Pro's picture

Thanks for cracking me up Scott. Tell you what, I'll be your pretend wife for now. And I say "Honey, if it's important to you then you have my support in buying the items." :-)

Thanks!!

Heading to the store tomorrow for bins and buckets. Thanks for the info.

Wow what will be next? I still can not believe all the people that have their head in the sand!!! Thanks for the info....We will keep on preparing!
Jackie

I'm admitting my ignorance by acknowledging that I've never heard of resin before. Amazing how many things I rely but don't even know it. It certainly explains part of the reason why food prices are rising. Thanks for the explanation.

Thanks once again Kellene. I will pass on the info to any who care and keep an eye out for the sales too...I just bought some bins as W-world and thought they might be a dollar or two higher than I expected but just passed it off as bad memory!

I wonder if we might just have to go back to glass....... ie milk bottles, jam and PB in jars like the good old days and recycle. Here in Canada I haven't noticed to much of an increase in food, only certain things, as a matter of fact I would say that a lot of our prices have been cheaper than in years. Maybe it is cas our $ is much higher. Thanks for the heads up.

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