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Raw Material Costs Impacting the Plastic Packaging Industry Projected to Further Increase

Extended Outages at AmSty and SABIC Causing Styrene Spot Price Increases

Manufacturers of plastic packaging have been faced with a dramatic increase in the price of polystyrene since the fourth quarter of 2016, which achieved an all-time high in February. Price increases over the past few months have included a 5 cents per pound increase in December, an 8 cent increase in February, and most recently a 15 cents per pound increase in March.

gpps-polystyrene.jpgThe increase in raw material costs can be directly attributed to the greatly reduced capacities in the refinery sector because of maintenance work at plants in North America and Asia.

Americas Styrenics (AmSty) announced on February 13, that it was increasing the transaction price of all grades of polystyrene (PS) produced by the company by 12 cents per pound ($265/tonne), effective March 1.

On January 31, AmSty announced that it was extending a regularly scheduled styrene unit turnaround at its 950,000 tonne/year St James facility in Louisiana until mid-March to complete repairs on critical equipment. The producer has two styrene plants at St James.

SABIC informed customers on February 1, about an equipment failure that will impact the facility’s ability to produce styrene until sometime this summer. SABIC and joint-venture partner Total operate the 1.1m tonne/year Cosmar styrene plant in Carville, Louisiana.

Styrene price surge to continue into first half of 2017

The result of these two extended outages has seen styrene spot prices jump higher this month. US Gulf spot prices have become the highest prices globally, and are attracting attention from Asian and European sellers.

At Alpha Rho, the increasing styrene costs continue to affect the selling price of our line of rigid plastic boxes. We have also experienced a 10% increase in the cost of corrugated boxes with another 10% increase expected in the month of March.

While we did adjust prices based on the December and February polystyrene increase, with the March increase of 15 cents, it is going to be very difficult to absorb the increase further without passing along some of it to our customers.

What does this mean for you—the customer?

Raw material price increases can be really tough on the customers because the suppliers can choose to transfer the added expense to the final selling price, but it’s the customer that has to ultimately shell out the extra money. Distribution is expected to stay disrupted throughout spring and summer, so it would be smart to buy now to reduce the impact of a future price increase. Choose a supplier that is willing to work with you in dividing the costs as opposed to one who will pass along the increase to you.

At Alpha Rho, we have been taking several measures to reduce the impact of this price increase such as:

  • Conserving light and heat by being energy efficient
  • Actively looking for alternate suppliers
  • Internalizing the cost by placing a temporary freeze on salary and wages

It’s a testing time for polystyrene suppliers such as ourselves to absorb the increasing cost of raw materials without passing some of it along, but we are trying our best to work with our customers to find a way forward that’s profitable for both.

We are a hands-on company known for our agile response times and approachable customer service. Alpha Rho is the largest manufacturer of a wide assortment of stock and custom clear polystyrene lid and hinged plastic boxes for handling, packaging, and storage applications in New England. Contact us now to discuss your packaging needs.

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