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COVID-19 pandemic put unprecedented pressure on many global industries supply chain

December 03/2021

MOSCOW (MRC) -- The ongoing impacts of COVID-19, surging prices for energy and raw materials, and Forces Majeures destabilising the global supply chain put mounting pressure on the supply chain not only in one industry, but instead represents a global challenge wrought by global issues. Most unprecedented is the COVID-19 pandemic and subsequent lockdowns that have led to a huge shift in consumer behaviour and economic patterns, according to Packaging Europe with reference to statements of Bernard Lombard from Cepi and Ron Marsh from the Polymers for Europe Alliance.

“Many sectors, including ours, had to adjust to a global economic slow-down but are now facing a spectacular and unexpected rebound,” explains Bernard Lombard, a trade expert working at Cepi, when discussing the impact of the supply chain crisis on the paper industry.

The problem of unpredictability appears to be shared across sectors. Ron Marsh, chair of the Polymers for Europe Alliance, an information platform initiated by EuPC, adds: “Demand is very volatile, but recently has been unexpectedly strong.” As economies around the world bounce back earlier than expected from the pandemic, various industries are struggling to keep up.

Then there is the issue of shipping. Currently, as Lombard says, “the distribution of containers around the world is imbalanced, some regions having too many, others lacking capacity”. The pandemic saw altered shipping routes and staff shortages that meant containers could not be processed. Marsh agrees global freight is “not functioning as smoothly as is customary”.

Additionally, across the Northern Hemisphere, last year’s winter was colder and longer than average. Catch-up maintenance work in Summer 2021 meant that supply has yet to align with demand for some segments, forcing a spike in energy prices. Speaking to Packaging Europe earlier this month, the president of EuPC, Ranato Zelcher, identified Storm Uri, which hit Texas in February 2021 and forced the shutdown of polymer production in the region, as a factor in exacerbating shortages for the plastics supply chain.

For Marsh, however, “the most obvious feature (of the supply chain challenge) is the rash of Forces Majeures that have afflicted supply chains during 2021”. IVK estimates that 81 Force Majeures statements were issued by raw materials producers between January and September 2021, which can allow companies to delay or cancel the fulfilment of particular contracts, largely without liability. 

“Not all of what is happening at the moment is related to short-term trends,” Lombard adds. “Some changes are here to stay. (COVID-19) has changed how people and companies behave, work, and consume.”

But it’s clear solutions are needed now. Lombard says an “element which influence is not to be underestimated is the power of communication. We must get better at communicating to our stakeholders about the current situation, its causes, and today and tomorrow’s challenges.”

A holistic approach to managing the current supply chain challenges could be essential for the plastics industry, too. “Recognition that the entire (supply) chain needs to come together because the success of polymer suppliers and plastics convertors are inextricably linked” is something Marsh identifies as a potential opportunity - a way to ensure, going forward, the supply chain does not fragment due to unnecessary competition and conflict.

For both Lombard and Marsh, the recovery of supply chains also needs to involve sustainable development if it is to be successful.

As MRC wrote before, oil refiners are ramping up output to meet a synchronized uptick in demand across Asia, Europe and the United States, but plant maintenance and high natural gas prices will constrain supply in the fourth quarter. This comes as profits for producing ground transportation fuels such as diesel and gasoline have rebounded globally for the first time since the start of the pandemic, as countries gradually emerge from COVID-19 movement restrictions.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,868,160 tonnes in the first nine months of 2021, up by 18% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,138,510 tonnes in the first nine months of 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.
Author:Margaret Volkova
Tags:Asia, Europe, PP, PE, crude and gaz condensate, propylene, ethylene, petrochemistry, packaging, USA.
Category:General News
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