The Ukraine crisis could lead to higher resin prices in North America and other parts of the world, according to market observers contacted by Plastics News.
Russia launched a military attack on neighboring Ukraine on February 23, driving up global commodity prices even as financial markets collapsed.
Rising oil and natural gas prices could have a macroeconomic effect on resin prices. Base resin prices, which had been on the rise since the onset of the COVID-19 pandemic in early 2020, finally started to decline in late 2021. The Ukraine crisis may change this trend.
“By introducing severe uncertainty to global oil markets, the situation in Ukraine will potentially support some resin suppliers’ efforts to push price increases based on higher energy prices,” the market veteran said. Phil Karig in an email. Karig is managing director of Mathelin Bay Associates in St. Louis.
“The key question is how long geopolitics will weigh on the market,” he added. “A short-lived conflict in Ukraine is unlikely to overwhelm our domestic resin supply and demand fundamentals. A longer conflict accompanied by escalating sanctions against Russia and Russian countermeasures in a back-and-forth could tip the world and the resin markets into situations that are difficult to predict.”
Industry consultant Esteban Sagel added in an email that, from a short-term point of view, “we have to take into account the evolution of oil prices”.
“Polyolefin prices in Asia are strongly correlated to oil prices,” said Sagel, director of Chemical and Polymer Market Consultants in Houston. “Therefore, as oil prices rise, polyolefin prices in Asia will follow.”
Analysts at Wood Mackenzie echoed those concerns, saying that for the chemicals industry, “the near-term impact of the situation in Ukraine is likely to be felt through two main petrochemical channels: energy and penalties. Any additional premium will likely have to be absorbed.” in the form of reduced margins.”
Additionally, Wood Mackenzie noted, Russia accounts for nearly 16% of total European petrochemical production, with its highest exposure in the polyethylene chain. This makes Russia an important – but not a critical – contributor to the industry.
As of 11 a.m. on Feb. 24, West Texas midstream oil prices had risen nearly 6% to over $97 a barrel. US natural gas prices also rose nearly 3% to more than $4.60 per million British thermal units (BTU). The Dow Jones Industrial Average fell nearly 600 points — or almost 2% — over the same period.