In light of the waves of huge rises in most plastic raw materials prices, factory owners were confused and asked about the reasons for this rise and doubted the possibility of speculation on the black market by importers of plastic raw materials and plastic raw material dealers, to the point of accusing the government of negligence in monitoring the prices of plastic raw materials in the internal market. Which prompted us at Al-Safwa Company to try to clarify the real reasons behind this continuous rise in the prices of plastic raw materials, out of our belief in the role placed on importers of plastic raw materials in assuming their responsibility in light of this violent crisis, and also out of our belief that the importer and the trader on the one hand, and the industrialists on the other hand, are… The two wings of industry, each of which has a complementary role in the success of this system.
As is common practice in the plastics industry market, the prices of plastic raw materials are re-evaluated and priced either monthly, as is the case in the Gulf countries, Egypt, and most of the Middle East, or weekly, as is the case in most East Asian countries.
Everyone knows that in the third quarter of 2019, the global economy entered a violent wave of global recession that began to escalate until it reached its peak coinciding with the events of the new Corona virus and the accompanying almost complete closure of all countries of the world and the adoption of unprecedented precautionary measures that continued into the second quarter of the year. In the year 2020, these reasons were enough to cause most of the prices of plastic raw materials to fall to levels below their minimum, as the prices of polyethylene raw materials, for example, reached approximately $650 per ton delivered to the importer’s port, and the prices of polypropylene raw materials reached $750, as well as the decline in the prices of a barrel of oil. Less than 20 dollars until the price of a barrel of oil reached at one point for free, and the situation developed so that its value was negative, reaching negative 30 dollars per barrel. This was an exceptional historical event in those days. Also, it is no secret to anyone the amount of losses that petrochemical companies producing plastic raw materials were exposed to. Also importers of plastic raw materials and traders during the global recession and the Corona pandemic during the initial wave.
At the beginning of the second quarter of 2020, precautionary measures began to be eased in all countries of the world, which contributed to a huge increase in demand for plastic raw materials.
This was due to the increasing demand for the plastic raw materials market, especially in the major industrialized countries (America – China – Europe – most East Asian countries), which prompted petrochemical companies to reduce production and increase prices continuously until this became the procedure followed by all petrochemical companies in all countries of the world. Which resulted in unprecedented demand rates globally, which led to an insane fire in the prices of plastic raw materials in the whole world, and there was a demand for demand in any quantity and at any price to fill the deficit in quantities. This also led to an increasing rise in sea freight prices, reaching an increase of 500% and delay. Terrible delivery dates reached two and three months in delay, which contributed to the scarcity of supply of raw materials and then an additional increase in global and local prices of raw materials. Also, oil and gas prices began to recover until they reached their highest levels in more than 4 years, bringing a barrel of oil to Nearly $70, which contributed to another rise in the prices of all production requirements related to oil and gas.
The hurricane in Texas in the United States, which led to the paralysis of entire petrochemical factories inside the United States, exacerbated the global crisis in the quantities of plastic raw materials supplied until the prices of polypropylene, for example, within the United States reached $3,000 and polyethylene reached $2,300, all of that. This prompted the United States to buy any quantity of plastic raw materials at any price from the Gulf countries and East Asia, which caused the petrochemical factories, led by SABIC, to adjust prices with violent increases that reached $600 in the first month of March of 2021, then just a week later it made another adjustment that reached $400. Dollars, then less than 3 days later, it adjusted the price by an increase of $200, bringing the price of raw polypropylene to $2,700. We must recognize and admit that adjusting the prices of plastic raw materials 3 times in less than 12 days in the month of March from the largest petrochemical company in the world was an indicator. Strong due to the severe crisis in the plastic raw materials market.
From all of the above, we can summarize the reasons for the recent increase in the prices of plastic raw materials:
1- Reducing production and raising prices globally from petrochemical companies.
2- Hurricane in Texas, stopping all petrochemical plants in the United States.
3- Unprecedented demand rates at any price in major industrialized countries.
4- The rise in sea freight prices to record levels that have never occurred before, and delays in delivery dates.
5- The tendency of most Egyptian petrochemical companies to export most of their production capacity abroad to benefit from the high prices abroad.
In the end, we hope that we have been able to shed light on a large part of the reasons for the rise in the prices of plastic raw materials in the recent period inside and outside Egypt.
Follow us in the next article, in which we present to our customers and everyone interested in the field of plastics the most important procedures that factory owners, as well as gentlemen, traders must follow in the current and future period in an attempt to avoid the effects of this violent crisis that is ravaging an important part of the industry and to exit it with the least losses.
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