Supply chain issues persist across the globe. The latest victim appears to be the petrochemical industry, producing everything from plastic to paint.
Plastic is one of the ubiquitous substances on the planet, with plastic pellets being used to manufacture a plethora of everyday products, from medical equipment and bike helmets to cereal bags and kids' toys.
At this point, the description of businesses struggling due to the pandemic is a familiar one. Like nearly every other industry, the petrochemical sector faced supply chain issues, staffing shortages, and pandemic restrictions. However, along with lumber producers and semiconductor chip manufacturers, the plastics companies have been facing their own unique issues, as well.
According to the Associated Press, problems have been arising consistently, from a freak winter freeze to lightning strikes and hurricanes.
"There isn't one thing wrong," Jeremy Pafford, head of Independent Commodity Intelligence Services' (ICIS) North American market development. "It's kind of whack-a-mole - something goes wrong, it gets sorted out, then something else happens. And it's been that way since the pandemic began."
First, hurricanes Laura and Zeta battered petrochemical production plants in Louisiana. Then, a freak winter storm in Texas that killed more than 100 people took out power and heating in areas across the state, shutting down the many chemical plants in the state. In July, lightning shut down a plant, followed by hurricane Ida in August.
"Some of these downstream petrochemical plants in the Gulf Coast regions are still shut down from Hurricane Ida," said a professor of plastics engineering at the University of Massachusetts-Lowell, Bridgette Budhlall.
Based on energy and chemical market analysis from ICIS, Polyvinyl chloride, or PVC, has jumped in price by 70%. Meanwhile, epoxy resin prices have skyrocketed 170%. Finally, ethylene prices have risen 43%.
PVC is used in the production of medical devices, pipes, credit cards, records, and more. Epoxy resins, on the other hand, are used for adhesives and paints. Ethylene, according to the AP, is the most important chemical in the world, used to make everything from packaging to antifreeze.
The price jumps have been driven by supply issues that began at the same time as the pandemic. Like many other industries, petrochemical manufacturers cut production in order to offset their pandemic losses. However, when demand spiked thanks to economic recovery and stimulus payments, manufacturers were blindsided.
"It's such a bizarre scenario," said Hassan Ahmed, a chemicals analyst with research firm Alembic Global Advisors. "Inventories are lean, and supply is low. Demand will exceed supply growth."
Paint giants Sherwin-Williams (NYSE: SHW) and PPG (NYSE: PPG) have both raised prices in an effort to combat the shortfalls. Despite the changes, the companies don't have much hope for improvement. After raising paint prices by 11% in the past two months, Sherwin-Williams says it may need to raise prices more in the coming year.
"The consumer is going to have to pay," said chemicals analyst for Argus Research, Bill Selesky. Selesky predicts that consumers will be willing to meet the higher prices thanks to government aid and savings.
However, those facing the largest supply issues are those with the biggest projects to cover. Decorating contractors are struggling to find the paint they need to complete jobs, with lower-grade paints seeing the most significant shortages.
Unfortunately, experts don't see things getting better any time soon. Given the wide range of issues that petrochemical companies will need to resolve, it's going to be a long time before things can even get close to "back to normal".