Supply tightness in Brazilian resin markets — partly related to Covid-19-related increases in syringe and take-out container demand — has pushed prices to unprecedented levels with additional increases expected.
Polypropylene (PP) has faced the most substantial price increases, because of tight supply, with homopolymer PP prices rising on average by 63pc year on year in December in Brazilian reals. Other resins, such as low density polyethylene (LDPE) have also increased significantly, though that material is more available in the market.
Braskem, the largest local resin manufacturer, has announced further increases for January, February and March to distributors.
Rising prices are expected to continue throughout the first half of the year.
The higher prices have been caused in part by increased demand for plastics for use in food packaging for take-out and delivery during pandemic-related lockdowns. Prices have also gained strength from rising freight rates, which have largely cut off imports as a supply source. Freight prices have been quoted as high as $11,000 / TEU, from China to Brazil, up from rates of around $4,000/TEU discussed in September.
Two additional factors will impact demand in resin markets in the short term, including the need for hypodermic syringes (largely made of PP) for the vaccine against Covid-19, and the ban on the use of disposable plastic utensils in São Paulo — Brazil's largest consumer market.
The Brazilian government left for the last minute a decision on ordering hypodermic syringes for vaccinations, which will create some supply difficulties, sources said. In addition, in an arm wrestle with local manufacturers, the government temporarily lowered syringe import rates from 16pc to 0pc and banned the export of locally produced syringes.
"The government has been complaining about the issue of local prices for plastic syringes, which means that the government was not aware of what was happening with the plastics market in Brazil," a plastics converter said. "Prices have been increasing a lot since last year because of the pandemic developments."
Local syringe producers had committed to delivering 30mn units by the middle of 2021 because of a decision by the Ministry of Health that required the use of a single type of syringe, despite the fact that there are four types manufactured locally that could be used. The Brazilian population is 212mn, according to the latest UN data. And two doses per person are needed for greater effectiveness of vaccines against Covid-19.
While the need for resin for syringes will cause a temporary increase in demand for certain plastics such as PP, the new law prohibiting the use of plastic utensils in São Paulo, could result in a decline in demand, sources said.
The law, which went into effect on 1 January, prohibits commercial establishments, such as bars, hotels and restaurants in São Paulo from supplying cups, plates, cutlery and other utensils made of disposable plastic.
The aim of the new law is to encourage recycling and to boost the transition to a circular economy, according to the São Paulo government.
The expected reduction in demand as a result of the new law could eventually result in a price decline, sources said.
