Just behind the metal industry, feverish price rises have also reached the plastics market, with a notable 30% overall increase in the price of PVC since September.
Faced with this unprecedented situation, the French Construction Plastics Union (Union Plasturgie Bâtiment) has published an open letter to the French Ministry of the Economy, Finance, and the Recovery, claiming that “processors of certain plastic materials are currently facing raw material shortages, preventing them from fulfilling their orders”.
Just when businesses thought that the healthcare crisis was coming to an end, a new crisis is emerging. The extent and duration of this situation has surprised all industry players, but it is the uncertainly above all that puts strain on each and every one of them.
The root cause of current shortages
To trace the origins of this new crisis, we need to go back to last spring, with the clear culprit being the present healthcare crisis, which is still not yet over.
“Resin producers have not been able to stick to their maintenance plans. So, when they had to resume production once again at maximum capacity, there were numerous machine failures”, explains Élisabeth Charrier, General Representative of the National Plastic Extrusion Union in France (SNEP, in French initials).
The weather has also been doing its best to cause more disruption. Texas and Louisiana have recently been hit by seriously cold weather that brought American production to a standstill. Then, once they restarted, they attended to their own markets first. Furthermore, in Europe, high water levels on the Rhône have compromised barge deliveries.
The result of all this is that, since September 2020, prices have begun to rise, and these have now taken the form of a sustained artificial surge provoked by the fear of shortages.
Difficulties for suppliers
This fear of shortages is well justified given that delivery times for supplies have grown significantly and even led to canceled orders. In these uncertain times, raw materials suppliers have had to prioritize strategic markets, including the healthcare market, but also key customers.
Faced with these difficulties, now is the time to review order books, prioritize deliveries, restructure revenue streams, negotiate with clients, etc.
Plastic processing businesses are suffering the effects of shortages, leading to delays, postponements, and even cancellations. But furthermore, they also have to address customer expectations and the eventual penalties for late deliveries.
Mediation and visibility
“We need national government authorities to play a part in mediation. We need them to ask suppliers to provide some visibility of their situation, in total transparency. We need them to ask customers to be understanding and not impose penalties if a building project fails to deliver on time. We need this so that all players in the sector can pause, adapt to the situation, and provide more certainty. The shortage of plastics has an impact on all end markets, including construction, civil engineering, packaging, and even healthcare and medical materials”. Élisabeth Charrier, General Representative of SNEP
What is needed is perfectly clear: visibility and synchronization throughout the supply chain to allow each organization to adapt accordingly. But can the state, if it is a reliable third party, really meet expectations in this respect? Does it have sufficient powers to help? With so many international players in the sector, can a national government really be the guarantor of visibility in the supply chain?
Evidently, synchronization is a major challenge, and the sector will need to structurally rethink its supply chain if it is going to emerge from this crisis. The COVID-19 pandemic, whose effects can still be felt after more than a year, has truly revealed the need for transparency, collaboration, and synchronization in our extended supply chains.