Since the last trimester of 2021, an important price increase, which concerns raw materials, has been recorded. This trend didn’t stop when 2020 ended but it continued in 2021 as well. This problem was caused by the lack of materials on a global scale, which blocked a globalized marked, in addition to the price raise. The reason why the raw material costs (paper, cotton, but most of all plastic) skyrocketed is related to different factors.
First of all, one of the main causes is the complete stop of all business due to covid-19. This problem has affected also the prices, especially when the world opened up after the pandemic slowed down, creating a demand of raw materials which was out of control.
The polymer market trend between delays and plant shutdowns
The increase of raw material costs had important consequences for many enterprises: they had to face tough times because of the production, business and supply chain damages. Above all, the polymers hit the record. Since January 2021, it was esteemed that the cost of this type of material had a 30% increase. What are the reasons for the lack of plastic materials such as PVC (polyvinyl chloride) and polyurethane (a synthetic polymer)?
We have a few and big producers of plastic materials in the world. They are mainly European and American big players who have a monopoly in this area. In the last period, they had to deal with a production crisis due to the plant shutdowns after the covid-19 emergency, which reduced manufacturing and in most cases, it stopped completely. Moreover, the orders of the transformers raised, because they were scared that there would be other cost increases, damaging the supply chain severely. The delays, the bad weather conditions in certain parts of North America, the peak of the sea fright costs from China to Europe also played a significant role.
All these elements provoked backlash even in the European production, which had to face a demand increase of plastic materials.
Raw materials, waiting for the cost normalization
Italy depends on the big foreign players as far as the raw material supplies are concerned. Before starting the price standardization of the polymers and reducing raw material costs, it will be necessary to wait for the restart of the exportation flows, which are still blocked because of the pandemic.
We have to keep in mind that new complications, which cornern the supply chain, might occur. The pandemic is still the main cause of the delays in the schedule of some companies. Since there are many petrochemical industries that are under maintenance (which are affected by important interruptions and slowdowns), the shortage of supplies might get worse because of the possible start delays.
We are witnessing a particularly difficult situation, where supplies are experiencing heavy delays and the hunt for the available material is increasing the raw material prices. A common european policy is fundamental to seal new strategic industrial agreements, which are meant to create stability worldwide.
The strategy adopted by Essay
Essay Group has developed a massive supply plan for all resources that are involved in the main production processes, stocking in the warehouse the necessary material for the next 9 months.
The company will keep its full production thanks to this operation, respecting the business agreements with the clients. Moreover, we can also meet the requests of the new ones with a clear timetable.
Case history
