Multiple resin price increases will result in an estimated total increase of $0.32/lb between September 1 and November 1, 2005. Based on PE resin prices, at the time of publication, $0.32/lb represents price increases in excess of 40% of the total per lb cost of resin.
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These dramatic increases are spurred by the recent catastrophic hurricane season which incapacitated domestic oil drilling, refining and transporting. The rising resin costs are based on the apparently genuine shortage of materials. A number of the resin manufacturers, including Chevron Philips, have released letters of force majeure declaring to their customers that, as a result of circumstances beyond their control, they are not required to and may not honor product delivery and pricing agreements previously in force. These letters have been received by geosynthetics manufacturers and as a result, some of the geosynthetics manufacturers have also released letters of force majeure – both blanket and case by case.
Resin manufacturers believe they will be able to resume full production by early November, however, because most resin manufacturers operate very close to capacity, there is little opportunity for “make-up” production. One geomembrane manufacturer is expecting a 4-5 month period of catch-up before the market normalizes.
Approximately 98% of a typical HDPE liner is resin. The resources for HDPE will be scarce and expensive for some time to come. This will cause many things to change and it is clear that the manufacturers will have no choice but to revise their long term pricing structure. The question is: Will lessons from the past be remembered and applied as manufacturers proceed?
