Plastics production in March decreased 1.2% according to the latest report from the Federal Reserve’s Board of Governors. Resin shortages in recent months kept a lid on plastics production. However, compared to March 2020, plastics production increased 3.2%.
Perc Pineda, Ph.D.
Chief Economist
Plastics production in March decreased 1.2% according to the latest report from the Federal Reserve’s Board of Governors. Resin shortages in recent months kept a lid on plastics production. However, compared to March 2020, plastics production increased 3.2%.
While estimates of plastic materials and resin production are yet to be released, resin and synthetic rubber production estimates for March 2021 indicate an increase in plastic materials and resin manufacturing. Following a 24.3% decrease in February, resin and synthetic rubber production—91.8% of which is resin—bounced back by 10.7% in March. While it was a significant monthly increase, it was 13.6% lower annually.
Given strong resin demand, production needs to increase above the twelve-month level for an extended time to close the ongoing resin demand and supply gap. The scarcity of resin has caused upward price pressures that started in the Fall of 2020. The plastics material and resins price index was up 9.4% in March, which has caused prices in plastics manufacturing to rise. For instance, the producer price index of plastics bag manufacturing rose 2.2% in March and 6.8% from March last year.[i]
Considering that monthly data tends to be noisy, a three-month moving average calculation shows that the resin price index in March was similar to the October 2014 peak – when the economy was not in recession, and there were no supply chain disruptions. During the 2008-2009 recession, resin production fell 30.6% in September 2008 but bounced back 36.5% the following month. This time it’s different, considering the far-reaching effects of the pandemic on supply chains.
Here’s the bottom line: Statistically, the March resin price index of 329.1 is an outlier caused by tight supply but will be resolved eventually. Improvements from the current resin scarcity could emerge, or become obvious, in the second quarter. This year, PLASTICS’ current forecast calls for a 4.0% rise in resin production and a 5.4% increase in plastics manufacturing.
[i] Eleven plastics producer price indices are available at PLASTICS website https://www.plasticsindustry.org/data-analysis-reports/.
