NEW YORK, March 21, 2021 (BSS/AFP) – The cold snap that gripped the United
States in February not only caused chaos in Texas and the southwest, it also
triggered a shortage in plastics that has disrupted a supply chain already
under strain from a lack of microchips and growing congestion at ports as a
result of the coronavirus pandemic.
So factories have had to shut their doors and consumers are feeling the
crunch.
At Toyota, a petrochemicals shortage affected production at plants in
Kentucky, West Virginia and Mexico.
Honda cited supply chain issues “related to the impact of Covid-19,
congestion at various ports, semiconductor shortages and severe winter
weather” to justify the temporary closure of five of its factories in Canada
and the United States.
Consumers are also being affected.
Nike said Thursday that its sales of shoes and sportswear were being
affected by congestion at ports around the country.
At a Best Buy home appliance store in suburban Washington, a customer said
she spent an hour with a sales assistant, only to find that many stove models
wouldn’t be available for several weeks.
“I had to buy a black stainless steel stove when I wanted a white one, and
for $200 dollars more than I’d budgeted”, complained Virginie Hines, a French
woman living in Maryland.
The problems in the plastics sector are the latest glitch in the supply
chain.
In mid-February, freezing temperatures paralyzed Texas and Louisiana, home
to many of the factories that transform oil into polyethylene, which is used
to make plastic bags, shampoo bottles or toothpaste tubes, polypropylene,
used for the hard plastic of car dashboards or refrigerators, or PVC, which
is used to make pipes or window frames.
While they are used to weathering hurricanes, these plants rarely
experience low temperatures.
At the height of the cold snap, more than 70 percent of ethylene
production capacity was down and at least 62 percent of polypropylene
production, according to S&P Global Platts.
“Not only was supply knocked off line from a freeze, but the demand for
products had just started to rebound,” said Robert Benedict of the American
Fuel & Petrochemical Manufacturers (AFPM).
The consequences are hard to pinpoint, but with petro-chemicals accounting
for a third of the raw material costs of a car, “it’s easy to understand why
we’re now seeing ripple effect in other manufacturing supply chains,” he
said.
– Frozen pipes –
Problems at several factories at the end of December had already limited
supply, said Jennifer Van Dinter of S&P Global Platts.
With the freeze, the plastics “supply shortages are likely to result in a
supply-constrained market for at least a few weeks and possibly into late
spring.”
After repairing the damage, especially the frozen pipes, the factories are
now getting back up and running.
The chemicals giant Dow expects its activity in Texas to return to normal
by April. The situation for PVC is more complicated because a “significant
portion” of world production is located in Louisiana, which had already
suffered from being slammed by Hurricane Laura last year, said Van Dinter.
These disruptions in plastics production come on the heels of a
semiconductor shortage linked to the boom in demand for electronics since the
start of the pandemic, which has plagued the auto industry since the start of
the year.
– ‘Bottlenecks’ –
For their part, the ports are facing a period of frenetic activity.
“We are in the seventh month of an unparalleled import surge, driven by
unprecedented demands by American consumers,” said Gene Seroka, executive
director of the Port of Los Angeles.
Not being able to go to the movies, go on vacation or eat out, people
instead ordered goods in large quantities.
These disruptions are being closely watched by the Federal Reserve, whose
chairman Jerome Powell stressed on Wednesday that the gradual reopening of
the economy could push up prices, “particularly if supply belt bottlenecks
limit how quickly production can respond in the near term.”
That could push price hikes, delivery delays and logistical difficulties,
said Gregory Daco of Oxford Economics.
But, he added, “they do not represent a significant brake on economic
activity, especially in this period of strong growth.”