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Katrina's resin price impact: 'dramatic and historic'

The Plastics Exchange’s September 8 Market Update reports that the effect of Hurricane Katrina “on the resin [price] markets will largely depend on how quickly the petroleum refineries that produce (among other products) the ethylene, propylene, and styrene monomers that are used to produce commodity plastic resins, are able to be brought back online and resume normal production and shipment.

However, the short- and mid-term impact on North American resin markets will be dramatic and historic.”

Polyethylene price increases were expected to take hold Oct. 1, after “some 11% of North American ethylene capacity was shut down, creating Force Majeure conditions [an unavoidable catastrophe that relieves contractual obligations] at several PE production facilities.”

The report notes that there were “rising energy prices, spiraling feedstock costs, and reduced resin inventories” even before Katrina’s devastating hit. For polypropylene, the report notes, “buyers must be cautious to not get caught in this frenzied updraft as prices have lifted in dramatic fashion, perhaps unsupported at the higher levels if the supply conditions improve more rapidly than anticipated.

“The long-term outlook for the polystyrene market will depend on already weak demand recovering,” the report said. “Lost production, quickly rising feedstock costs, and the logistics handicap—the inability to bring empty railcars to the plants and to deliver full railcars to customers—will likely keep upward pressure on PS prices for at least the immediate future.” For more information, visit www.ThePlasticExchange.com, or call 800/850-2380. —Jim Butschli

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