2022 Continues to prove that it is critical year in the polymer industry at all levels. Every quarter there are rapidly moving events starting from the pandemic to the Russian Ukrainian war to crude oil prices rise. You are most likely turning your attention now to know the answer of these two questions:
“What happened in the second quarter and what awaits the industry in the next two quarters?”
In this article, we will connect the dots to know how far the global plastic market has been affected by current circumstances, how the resin product prices change by the new factors in this dynamic market, and how the profits will be affected by the supply and demand movement over the short and the long term.
Polymer Industry Updates
There is a strong relationship between politics and economy. Regarding the plastic industry, it is very sensitive to any political change. Political mainstream affects oil prices, by extension, plastic raw material prices.
Here are how the most critical political events affect the plastic industry?
1- Biden administration to reduce the use of single use plastics
The American president Joe Biden and its administration are setting new rules on reducing the use of unnecessary single use plastics.
They have put a process to create ways that the government can reduce single-use plastics purchasing and using.
Now they are seeking the public feedback regarding to the use of plastic that consumed in shipping and packaging in addition to other single use plastics.
As a side note, a ban on single-use plastics came into effect in Abu Dhabi, Emirates starting from first of June, and the sale of single-use plastics has been prevented across all retailers.
2- Constant attempts to set Russian oil prices at a reasonable price
There is current ongoing discussion between USA, JAPAN, and Russia to set Russian oil prices at a level that covered the costs of production process.
Noteworthy that the global price of oil could hit $140 per barrel if the proposed price cap in Russia not activated.
3- Political chaos in UK & Russia entraps the supply chain
- UK Political crisis has worsened supply problems
After the unraveling of Boris Johnson’s government, there is a necessary threat on the supply chain in UK.
75% of logistics firms in UK announces its closure after Johnson’s announcement. SC experts stressed that there could be no worse time for raw materials retailers.
The retailers and their supply chains need stable government especially after they were trying to recover from the Russian Ukrainian war impact.
By the way, the UK government announced one year before Johnson’s announcement an injection of £53 for the manufacturers to help them solve supply chain problems and to become more productive.
- Russian Ukrainian war further disrupting the plastic industry
Since the war has begun, plastic industry supply chain has become interrupted. Multinational companies face difficult decisions to deal with the Russian raw material suppliers or not.
For instance, Shell company released a statement saying they were unable to end their reliance on Russian oil, then after being criticized from the Ukrainian prime minister, they apologize and highlighted the pressure they have faced while reshaping supply chain.
The war between Russia and Ukraine causes supply and demand interruptions, damages polymers consumer sentiment, which could be great effect on any industry especially the plastic industry that basically depends on oil prices.
Now let us see besides Shell, how other leading petrochemical companies deal during the war?
LyondellBasell will turn down new opportunities and plan to discontinue existing business with Russian entities.
BASF & DOW contribute to help meet humanitarian associations needs for the people of Ukraine such as the red cross.
ExxonMobil plans to exit its operations in Russia.
Plastic Industry in Numbers
- Q2 leading petrochemical companies’ profits
Oil prices surged to peak of 123 dollars per barrel in the first quarter. Through the two quarters of 2022, energy is the only positive sector. Plastic industry affected directly by oil prices but the Russian Ukrainian war still interrupting the supply chain. GAP Polymers will help you to know how far the leading petrochemical companies’ profits affected in Q2:
SABIC, the petrochemical giant corporation, announced on Tuesday the 2nd quarter net profit. It rose 4% to 7.93 billion Saudi riyal ($2.11 billion).
Noteworthy that the company warned that the margins will be under pressure in the current half of this year because of the global factors.
There are obvious reasons for these expected margins such as lockdown in China, supply chain interruptions in Europe and the slowing economic global growth.
Sabic approved cash distribution 29% in this year’s 1st quarter that is higher than the 1st half of 2021.
BASF has announced its second quarter profits. BASF sales increased by 16%, it reached €22,974 million ($23,171m), while 1st quarter sales were €19,753 million ($19,922m). This increase is on behalf of the currency effects and higher prices.
BASF net income reached an expected €2,090 million ($2,107m), the higher income from the shareholder is the secret behind the income increase.
Saudi Aramco, one of the biggest oil producers, announced its net income that jumped 90% when it compared with the same quarter last year. The company recorded 181.64 billion riyals ($48.39) billion for the quarter to June 30 form 96 billion riyal in the last year.
The reason behind this is the latest increases is the higher prices in crude oil and the strong margins. Besides these reasons, the Russian-Ukrainian war pushed countries to search for alternatives to the Russian Gas.
“We Expect oil demand to continue in growing for the rest of this decade although downward economic pressure on the short-term global forecasts” stated by Aramco CEO, Amin Nasser.
ExxonMobil, the American multinational company, has announced the earnings of $17.9 billion. Noteworthy that the generated earnings of $17.9 billion and cash flow that’s coming from the operating activities in the 2nd quarter 2022.
Worth mentioning that the second quarter earnings of the second quarter represent a significant increase. The first quarter earnings in the last year were $5.5 billion.
It is expected that Dow Inc. earnings will witness a decline in the 2nd quarter of 2022. These expectations depend on the reports results that ended in June 2022.
The price change and future earnings will affect the final report that expected to release in the end of June 2022.
Dow revenue is expected to reach $15.69 billion, which represents 13% higher than the year ago quarter.
Borouge, UAE’s petrochemical company, announced the financial results with 16.4 per cent for the first 6 months of the current year. This increase represents $3,460m for this half versus the same period in 2021.
This significant increase is driven by sales volume growth of 8.6 per cent and the average price per tonne “4.1 per cent growth”.
Despite the higher underlying feedstock prices, Borouge achieved growth by 17.6 per cent in the second quarter.
Worth mentioning that “Borouge” announced a new milestone by establishing the 4th expansion in Ruwais.
7- Saudi Advanced Petrochemical
Although the company witnessed 13% increase in sales volume, Q2 net profits has declined $29 million.
Worth mentioning that that the profit at the same period last year reached $70.6 million.
- Resin Pricing
When it comes to the war effect on the resin prices, polymers suppliers and distributors had to learn a valuable lesson as the resin prices will continue to rise at a reasonable rate unless the demand destruction is hit by surprise circumstances such as the war and the pandemic.
The United Nations conference on trade and development remarked that if those high rates remain elevated through 2023, the global import price levels could rise by 10.6%, which can affect the islands that rely on imports that arrive by sea, and this also affects the final price of low-value-added products, and the final prices of products such as computers will be affected by these higher rates.
In the rest of 2022, the resin and materials production will continue at a higher rate, the product output will increase approximately 1.8 %, and Mold production is expected to rise 3.4%.
Latest Plastic Industry News
When it comes to another latest news in the plastic industry, no sound is louder than that of the battle between Russia and Ukraine, let’s know the secret behind this significant effect of the war on the plastic industry:
- Russia was the largest supplier of natural gas and oil to the European Union, and it is the largest exporter of energy, natural gas, and hard coal.
- Statistics suggest that Russia exports around 2.4 million polymers tons per year, which is a big volume.
- Ukraine is a huge provider of chemical products, raw materials, and machinery such as transportation equipment.
- Ukraine’s currency began to go down which will increase the cost of their exports.
Now let us see the war effect on the plastic industry:
- According to CNBC, Oil prices hit their highest level for more than seven years, and crude oil prices represent an increase of more than 20% this year.
- The average annual price Brent crude oil jumped to 113 U.S. dollars per barrel. It is considered as the highest level since June 2014. The reason is the continuous difficulties in payments and shipping.
- War can increase supply chain disruption, which would not heal yet from the pandemic.
- The manufacturers have a strong fear of harm, as there might be a shift in demand from plastic to other raw materials because of the lack of confidence that the consumers have.
- If the war leads to further market distortions from the Russian side, the market will look toward Emirates, Kuwait, and Saudi Arabia, as one region’s loss may well become another locale’s gain.
Product Updates in the Plastics Market
This year witnessed a strong demand for propylene, and polypropylene supply has delayed matching the market demand, especially in western Europe and North America.
As a result, the race between propylene supply and demand will continue in the rest of 2022, because demand will continue to grow more quickly than supply, and for the next 4:5 years the global propylene demand is expected to continue.
Prices have been affected by the spike in the crude oil global prices because of the Russian Ukrainian war.
- PE (Polyethylene) & PP (Polypropylene) resin prices drop as many resellers are de-stocking the material to minimize its exposure.
- The resin market witnessed weakness in the start of July, but it is expected to flourish cause fresh off-grade materials will be available in the market. There is a demand for packaged truckloads of resins during this quarter.
- Ethylene prices had snapped in June because of the back month contracts slid less than prompt.
- PET Prices market is expected to flourish in the current quarter because of the western markets seasonal demand. This demand will support the PET export markets.
- Suppliers in the next quarter will be under pressure to reduce inventory processes because warehouses remain packed near capacity. Supply chain and other services may face difficulties.
Packaging Industry in 2022
Are you wondering why we have divided packaging development into 3 eras? The answer is that we noticed that since 2020, there have been 3 critical changes happened to the packaging industry. First, we have to demonstrate the reasons for these changes:
- The first reason for this change is that the packaging industry depends mainly on the customers’ behaviors. In this ever-changing life, customers are always searching for new packaging products and new innovations to satisfy their needs.
- The second one is the digital transformation in our daily lives. Social media and mobile devices sped up the development of the packaging industry.
- In addition to those reasons, there is a significant shift to the online shopping that increase the plastic waste. Proceeding from this situation, consumers are searching for sustainable packaging solutions.
The 3 plastic packaging eras in detail:
“The flexible packaging Era” (from 2000 to 2009)
In this period, consumers behaviors change, they need to use flexible packaging items, small handy packs.
That’s why the packaging manufacturers aim to keep up with the new needs. They shift from rigid packaging such as glass and metal to plastic. They manufacture lightweight and small packs with less material.
“The Recyclability & Awareness Era” (from 2010 to 2020)
The financial crisis that the world faced, combined with the pandemic. Consumers start to realize the problem of packaging leakage and its effect on the environment. They become aware of how to depend on online shopping during covid-19 crisis. This era also witnessed an increase in health awareness; the consumers became much more dependent on fresh and healthy goods.
The packaging industry kept up with this evolution. The manufacturers and brand owners increase their usage of recycled materials. They come back to the non-plastic packaging such as paper. It is worth mentioning that plastic was still their first choice as they didn’t find functional and cost-effective alternatives.
“The Digitalization Era“ (from 2020 till now)
In the current era, social media and E-commerce have become the main engines for consumers. That’s why brand owners try to satisfy consumers by providing sustainable solutions. The packaging is adapted to e-commerce standards. Brand owners try to keep pace with the innovative technologies like (refill & reuse) technology with sustainable packaging materials. Worth mentioning that there will be a continuous development in the packaging industry in the next decades as a response to the higher production of the new plastic compounds.
Your FAQS about packaging solutions
1. How to bond or seal uneven surfaces?
Depending on your application, we have 2 options to choose from to solve this problem:
- The first is the double-sided foam tape; it is a thick tape that can help you in bonding uneven surfaces. You have to choose a good type of tape that can withstand high levels of impact and vibration. This tape can be a workable solution for many applications such as plastic fabrication.
- The second option is the single-sided foam tape that you can use to fill gaps and seal. It will be perfect for plastic insulation applications.
2. How to solve the highness of injection molding temperature?
First, we have to divide the thermoplastics into 2 types; Good fluidity such as PP, PE and PS & Poor fluidity such as hard PVC (Poly Vinyl Chloride) and PC (Polycarbonate). The high temperature increases the flow of the raw material. This will affect the impact resistance of some materials such as PS (Polystyrene).
3. What is the solution for air bubbles in injection molding parts?
When you find bubbles in injection molding products, you must solve this problem immediately. If you identify the reason, you will solve it. Let us dig deeper into this problem reasons:
If the reason is in the drying process of the plastic raw material, you can solve it by paying attention to the hopper insulation management.
The reason may be the melt temperature setting of the injection mold. You have to consider that holding pressure and the injection pressure are not enough.
4. What to do to solve the injection molding wall thickness problem?
If you face this problem during injection molding process, you can simply solve it. The first solution is noticing the areas that have the problem then you can find 2 issues; the first one is the thickness around screw holes and thickness in the parts that need more strength.
If the problem comes from the screw holes in the molding parts, you can use “screw bosses” which is a small cylinder of the material that can be put around the screw holes, you can tie it to the rest of the housing. This method can help you to uniform wall thickness.
When it comes to the strength of specific part while the wall is too thick, the ribbing is the best solution. First try to thin the exterior face and turn it into a shell, then you can add the ribs of the material to the interior. This can help you to increase the rigidity and the strength of this part. With this solution you can reduce costs.
5. What causes voids in the injection molding parts and how to solve it?
“Voids” presents the air pockets that appear in the molding parts in both transparent and colored applications. This defect occurs when the internal layer takes more time to cool than the outside layer.
Here are 3 options you could try to solve this problem:
- The first suggestion is to choose one of these solutions: increasing the shot volume, increasing the screw forward time, reducing the melt temperature, and adjusting the speed of the injection.
- The second solution is related to mold, here you must ask yourself some questions. Is the gate in the correct position? Is the mold temperature too low? Are you using the perfect gate size?
- The material could be the reason, you can check the material if it is affected by the excessive moisture.
Latest Trends in the Food Packaging Industry
The global food packaging market is expected to reach $478.18 billion in 2028 at a CAGR of 5.1% in the period between 2021 & 2028.
Preventing food related diseases, preserving food quality, Prolonging the products’ shelf life. All these and more are the purposes of food packaging. And now with the ever-changing lifestyles, the need to packaging trends with plastic material becomes more crucial. Let’s see how:
Consumers are permanently searching for packaging innovations which perfectly matches the plastic industry and polymers.
For instance, PP (Polypropylene) is used to produce creative food packaging trends. Current trend in 2022 is creating attractive labels from plastic resins. Worth mentioning that Sabic produced first PP packaging labels from ocean-bound plastic.
When it comes to the global food packaging market by application, study in 2020 approved that the fruits and vegetables packaging took the first place, then the bakery and dairy products.
There is a new creative packaging equipment every day, so the need for LDPE shrink films, PVC wrappers will increase. The plastic industry will continue to provide solution to satisfy all customers’ needs and expectations in packaging.
The future of the plastic industry GAP (Global Advanced Polymers) Polymers In 2022
The future is already here in GAP polymers, as we aim to sell 1 million tons of polymer material globally by 2030 while being the top distributor in Africa.
We try our hardest to build strong strategy by delivering unique value to our customers. “We put ourselves in our customers’ shoes”, that’s why we are not only offering customer after-sales service but also technical service to ensure that our clients are perfectly dealing with our raw materials.
We have been successfully developing our 6 branches, and in 2022 we are expanding in new plastic markets such as North Africa.
We are also looking forward to supplying our customers with new products such as recycled plastic.
“GAP Polymers” also wants to enhance the relationship with our customers to be a long-lasting relationship by laying our valuable fundamentals such as integrity in business, providing quality in the supply process, flexibility, teamwork to ensure that our customers are highly satisfied.
We hope that our brief newsletter has given you economic indicators to anticipate how the polymer industry will deal with global crises such as the pandemic. How war will affect the prices of the products.
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An Overview of Polypropylene Thermoforming Process
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