Price of plastic materials and resin

Energy items like natural gas and crude oil are both used to make plastic. Therefore, changes in oil and gas prices are reflected immediately in the price of plastic materials and resin as producers pass through these cost fluctuations to their customers. Demand for plastic materials and resin comes from all sectors of the economy, including packagers of consumer products, makers of medical instruments, car parts and rigs, and construction operators. Thus, the level of domestic and international activity in these sectors influences the demand for and price of plastic materials and resin. Furthermore, because this driver tracks the price of US-made plastic materials, it is susceptible to fluctuations in exchange rates. A weak dollar makes US goods more competitive relative to imports, while a strong dollar has the opposite effect.

In the years before the financial crisis, strong economic growth in the United States and overseas, combined with a weakening dollar, provided a potent engine of growth. The effect of these trends was amplified by rapid growth in various markets from China to Brazil, which placed upward pressure on oil prices that were passed on to plastics. As a result of these factors, the producer price index for plastic materials and resins jumped from an average of 148.9 in 2002 to 255.1 in 2008. However, by late 2008, the entire world did endure the effects of the financial crisis in the year and from collapse of the housing market. The trend of rising plastic prices then reversed as the US manufacturing and housing sectors plunged, while growth in emerging economies slowed in line with these various developments in the period which made the prices of such materials to be 10.7% lower in 2009 than the previous year.

The ground lost in 2009 nevertheless recovered in 2010 and the price index then surpassed previous highs in 2011. While the US economy was slowly shaking off the impact of the financial downturn, other countries (particularly in East Asia) continued to rebound rapidly, making up for soft domestic demand. Stoking prices even further was the continued weakness of the US dollar due to the loose fiscal and monetary policies enacted to combat the economic downturn. A weaker US dollar means that domestic producers have to spend a greater amount to purchase oil, the price of which rose considerably over the two years to 2012. The remarkable, persistent drop in the world price of oil that began in late 2014 caused plastic material and resin to fall 11.3% over 2015. Similar with the previous year, it should be noted that world prices for both natural gas and crude oil fell in 2016, which in turn dragged down the domestic price of plastic material and resin further.

Oil prices subsequently trended upward, placing upward pressure on the price of plastic materials and resin. In 2017 and 2018 the price of plastic materials and resins grew by 5.3% and 4.8%, respectively. A significant 10.2% decline in the price of crude oil in 2019 drove a similar decline in the price of plastic materials and resins, which dropped 4.2% over 2019. Alongside crude oil prices, plastic materials and resins prices declined significantly in early 2020. This decline was driven by the onset of the pandemic, which resulted in low crude oil prices due to a shutdown of economic activity. Similarly, since plastic is an input used in many downstream industries from car and toy manufacturers, the shutdown of these facilities in the period hurt demand for these materials amongst upstream producers which dampened prices by 4.8% in 2021, the reopening of the economy helped stem growth among these affected downstream industries, which in turn fueled growth for these products again to cover a wider base of demand in the year. Although as many manufacturers had to slow their activity in the year before, this influx of demand for products that are either made from plastic or rely on this material for packaging purposes contributed to manufacturers operating costs growing aligned with demand in the year. Similarly, crude oil prices climbing in 2021 pressured prices, as these factors contributed to an uptick of plastic prices by 33.4% in the year.

The initial market health pointed towards supply conditions normalizing in 2022. However, the Russian invasion of Ukraine has injected crude oil prices with more volatility. Sanctions placed on Russia, including reducing imports from Russia and removing Russian banks from the SWIFT messaging system, are anticipated to delay payments for oil. In response, Russia has threatened with sanctions of its own, which could go as far as reducing or cutting oil supplies to Europe. In response, crude oil prices expanded rapidly in 2022, as Russia supplies roughly 11.0% of the world's oil supply and more than one-quarter of Europe's crude oil. The continued conflict has exacerbated supply chain issues surrounding crude oil. As a result, plastic materials and resin prices were subject to more volatility than anticipated. While plastic and resin remain essential inputs for many consumer-sought products, the tempering of consumer spending in the year partly because of inflationary pressures and increasing energy costs from the war contributed to prices rising at a tempered 2.5% in 2022.

Sharper rebounds in crude oil and gas production in 2023 helped curtailed the production costs for these specific materials in the year even as consumer spending has remained elevated from the previous year. As these factors had been present for 2023, the price of plastic materials and resin fell by 9.0% in the year. Such factors like boosted energy production will help ensure prices will not upscale significantly in 2024, however, elevated consumer spending in the year will present a challenge for producers of this material as this is set to elevate the amount of production in the year for this input among potentially more products relying on this material than from the previous year. Consequently, plastic prices are expected to fall 9.0% in 2023, carrying over to 2024. IBISWorld expects prices to experience volatility in 2025 with anticipated growth as consumer spending and the industrial production index show signs of a growing economy.