Resin distribution and it's more recent challenges that persist

North American resin distributors have more material for their customers than they did a year ago, but challenges remain even as sales volume continues to grow.

"Supply is easing up," said Ed Holland, president and CEO at M. Holland Co. in Northbrook, Ill. "Domestic raw materials are easier to find. Polyethylene and polypropylene are getting in balance, but getting material where we need it and when customers want it is more complex."

"We haven't been held back by resin availability," added Greg Boston, president of General Polymers Thermoplastic Materials in Rochester Hills, Mich. "Our suppliers have been good to us in the last year, and we've tried to be direct with our customers about price increases."

Plastics News recently checked in with resin executives to get their takes on the state of the resin distribution market in the second half of 2022 and into 2023. Here's what they had to say.

Khanna

Improved resin availability has led most distributors to post sales gains — in dollars or in pounds sold, or both — so far in 2022.

"Availability has improved, even if there's some concern for additives like flame retardants in some specialty applications," said Kevin Chase, president of Chase Plastic Services Inc. in Clarkston, Mich. "The market's not balanced, but it's not as tight as it was. … Lead times are down slightly … but it feels like order rates have plateaued."

For Osterman & Co. in Cheshire, Conn., 2021 was the best year in the firm's nearly 50-year history, according to Dave Dever, executive vice president of sales, marketing and global operations.

"Plastics helped during COVID," he said. "It's like some people learned plastics were good then." And although logistics have been "a train wreck" for the last couple of years, Dever said that Osterman has seen recent improvements on some truck shipments.

Some materials such as polybutylene terephthalate and acetal remain in tight supply because of the availability of flame retardants, according to Abby Khanna, co-founder of California Plastics in Downey, Calif., but supplies of other materials such as polycarbonate, nylon and ABS "are opening up."

Sales at Conventus Polymers in Parsippany, N.J., are up by double digits so far in 2022, President John Jorgensen said. "Resin supplies have improved, but there are still some challenges here and there," he added. "Supply chains really affected everything."

In 2021, "we were working hard trying to get [all the resin] we could," added Grant John, CEO at PolySource Inc. in Independence, Mo. "There's more available this year, even if some are hard to get because of flame retardants or pigments. Sometimes a supplier might have the resin but not the flame retardant."

At Nickel City Polymers Inc. in Buffalo, N.Y., resin supplies are more readily available and lead times are shorter, according to owner Larry Welnowski. "We're trying to stock up on materials like acetal when we can," he added.

M. Holland Executive Vice President Marc Fern described 2022 as "a year of unforeseen costs."

"We've seen shipping charges and costs to access material …but it's getting more into balance," Fern said.

The U.S. PE market also is working to get back to its previous export rates, according to Jerry Murcia, CEO with resin exporter Montachem International in Fort Lauderdale, Fla. "Now we're seeing different variables, like the Russia-Ukraine impact on oil," he said.

"Although the labor shortage still seems to be a factor when it comes to logistics, we're seeing freight increases level out," said Cathy Dodd, distribution vice president with Avient Corp. in Avon Lake, Ohio. "There are still a few supply constraints … and the continued shortage of additives is causing issues with glass-filled FR grades and color concentrates.

"Overall, though, we're starting to see demand and supply improve … [and] most of the suppliers and companies we work with have been able to end any force majeures that were in place."

The improved ability is quite a change from 2021. "Last year, we were begging for product," said Kirt Dmytruk, president of with Vinmar International's Vinmar Polymers America unit in Houston. "Customers were asking when material was going to be available. … We didn't know what the future was going to look like … and now supplies have improved and there are some concerns about orders slowing."

"Globally, availability has improved, but there are still a lot of challenges," Vinmar International CEO Vishal Goradia said. "It depends on the specific region, origin and destination."

In 2022, there's been "a big change" in terms of availability of product, according to Paul Tayler, CEO of Nexeo Plastics in The Woodlands, Texas. "We're in much better shape now, even though there are some pinch points in additives. … Lead times had been five to six months. …They're more normalized now. …The supply chain has improved, especially in North America."

"It's like the weather changed," said Jim Adams, president and owner of with Shaw Polymers in Crown Point, Ind. "Resin's available, but there are still some issues with logistics. … Supply has increased to the point where we've seen some price erosion in the last 60 days."

But not every supply chain issue has been resolved.

"Last year, our biggest challenges were related to imported goods getting held up at U.S. ports and tight trucking capacity," said Marco Liuzzo, CEO with MGI International LLC in Melville, N.Y. "While things have improved considerably on the import side, things remain extremely challenging domestically for both domestic shipments and for exports."

He added that for export sales, MGI is seeing U.S. ports frequently changing gate cutoffs and reducing time windows for container receiving. Trucking and warehouse capacity also remain tight, Liuzzo said.

New resin capacity also is affecting distribution markets in 2022, according to Phil Karig, managing director with Mathelin Bay Associates in St. Louis. "With resin markets showing less of an upward pricing bias than 2021 and new capacity coming online … some resin suppliers are trying to quietly move more spot resin through distributors in hopes of avoiding some downward pricing pressure with their own contract customers," he said.

Dodd

Demand growth for resin distribution in 2022 is coming from multiple end markets.

Jamplast Inc. of Ellisville, Mo., has seen growth in durables, outdoor products, packaging and consumer goods, according to President Michael Bernich. Vinmar has experienced growth in food packaging and industrial markets, Dmytruk said.

Industrial market sales have been good for Nexeo, Tayler said. "Near-shoring and reshoring have helped," he added. "That's a benefit to local processors." Medical and health care sales "remain robust" for Nexeo, and automotive market sales posted better volumes in the last quarter.

"We're seeing pipe and conduit growth in infrastructure," said Adams at Shaw. "There's a lot of business there."

At M. Holland, sales have been strong in packaging, health care, wire and cable, and automotive, in spite of supply chain challenges, according to Fern.

Welnowski said Nickel City has seen solid growth in nylon and acetal materials used in gears and gunstocks. Growth markets at PolySource include electrical/electronics, housings, outdoor and agriculture, which John said "doesn't go with other parts of the economy."

More of California Plastics' customers have been asking for post-industrial and post-consumer recycled material, Khanna said. "We can work with local recyclers or buy someone's excess inventory," he added. "Their trash can be our treasure."

Karig

Inflation and interest rates are playing a role in resin distribution. U.S. inflation rates are running at about 9 percent — their highest in 40 years — which could affect consumer spending. The U.S. federal funds interest rate began the year at 0.25 and is now at 2.5, which could slow down residential construction. The Federal Reserve has been increasing interest rates in an attempt to cool off inflation.

"We're all facing a dynamic time, and it's certainly challenging for us, our suppliers and our customers," Avient's Dodd said.

"There really isn't a single economic factor at play," she added. "In some supply areas, you can experience freight labor dynamics combined with a tight supply chain. Layering on inflation and higher interest rates complicates the other problems, as does the high cost of fuel."

In spite of these factors, Dodd said that Avient "isn't seeing a huge demand shift right now. … Some [industries] have pent-up demand that we can now fill as supply has finally opened up. … Others are more recession-resistant. Health care certainly has that dynamic."

At MGI, Liuzzo said the firm is continuing to assess the impact of inflation and interest rates on its customers. "While economists are concerned about a slowdown, … we're encouraged that global plastic demand is still expected to grow at a 3.7 percent annual rate over the next eight years," he added. "Resin suppliers are continuing to rely more on distributors in general."

Nexeo "hasn't seen a dramatic impact" from inflation or interest rates," but Tayler said consumer products could be affected, as supplies have built up in the value chain. Adams at Shaw added that processors could pause on buying heavy equipment or return to just-in-time inventory.

"Interest rate increases are likely to cool demand across the economy, but with a lag, over the next few quarters," Karig said. "Since resin distributor customers tend to be smaller on average than customers buying direct, there's a possibility that smaller resin buyers with less ability to weather an extended economic slump will disproportionately affect demand for products from distributors."

"We have a lot of customers in areas like toys and housewares, and we've seen a slowdown in their order patterns," said Joe Mysza, commodity resins vice president at Mass Polymers Corp. in Bridgewater, N.J. "Interest rates affect their cash flow."

General Polymers "has seen more growth than the effects of a slowdown," Boston said. Khanna said that it's too soon for California Plastics to see much impact, but he added that some customers have become "less aggressive" in buying material.

"Based on the signal we're getting from building and construction, we expect a pullback," said Jorgensen at Conventus. "We're continuing to grow in new applications, but others are slowing down."

"People are paying more for gas and groceries, so they're spending less on other things and that can lead to higher inventories," PolySource's John said. Higher interest rates also can affect manufacturers' plans, according to Chase.

At Osterman, Dever said officials "are concerned about possible demand destruction." The firm has managed inventories to take care of its customer, but now it "has to be prepared for a business slowdown," he added.

"I think last year, our customers were shocked at how high prices went, but now that's where we are and some prices are coming down," Nickel City's Welnowski said. Higher interest rates "affect how stocking distributors run their business," according to Fern at M. Holland.

Higher interest rates impact durable goods and infrastructure applications, including those that use PVC, according to Murcia at Montachem. Bernich at Jamplast said customers are no longer ordering more material than they need because of fear of shortages as they did last year.

"A slowdown will affect the economy in general, and higher interest rates make customers more conservative," Vinmar's Goradia added.

Ed Holland

Resin distributors are finding ways to grow their companies in spite of these economic challenges.

Shaw will take a big step this year when it begins distributing polyethylene for Shell Polymers from a major new plant near Pittsburgh. It will be Shaw's first branded supplier in its 25-plus-year history. The firm currently distributes nonbranded grades of PE, polypropylene and polystyrene.

"It's a piece of our portfolio that's been missing," Adams said. "Shell's going to be a great partner for us." He added that primarily because of the Shell addition, Shaw is looking to add sales reps in the Midwest, Northeast and Ontario.

Nexeo continues to grow MyNexeo, an e-commerce platform that launched in June. With MyNexeo, customers can shop more than 15,000 materials in the firm's catalog and find their favorite and most commonly used products.

"We've had a good number of logins and are very excited about it," said Tayler, adding that Europe will be the next region to access the platform. Nexeo is also looking to add more recycled content or bio-based materials.

"The pull from customers for those materials will continue," Tayler added. "We want to be proactive and not get caught on the back foot."

MGI is preparing to launch The Aspect Company, a unit focused on sustainable solutions. Liuzzo said the firm also plans to continue to grow its engineering resins business and "to hire the best talent in the industry to support our overall growth."

General Polymers has added a sales rep in the Chicago area and is looking to add reps in St. Louis, Boston and the Southeast U.S. "We're seeing opportunities all over the country," Boston said.

The firm also recently added Enviroplas compounds to its line card and will install blending equipment for the first time this fall as well as add its first sales rep in Mexico.

At California Plastics, two new sales managers will be added, and Khanna said a second location in the Midwest U.S. should be up and running by 2024.

Earlier this year, Conventus added sales reps in the Midwest and West Coast and is looking to add five more commercial hires by the end of the year. Jorgensen said the firm is also looking to add two or three new suppliers, possibly in fluoropolymers, sustainable materials or high-performance resins.

PolySource moved to a larger office in June and is looking for "strategic growth" this year, John said. Chase added that his firm likely will wait to see how the economy is doing before adding new positions, and it is also looking to add specialty suppliers.

Osterman has added at least 20 new positions since early 2021 — half in sales and half in sales support — and plans to keep doing so. "We don't want to miss out on training people," Dever said. Nickel City's polypropylene business is growing, and Welnowski said the firm is looking to add sellers in the Midwest, Northeast and Southeast.

"[M. Holland] is always look to enhance our product offerings," Fern said, and is following a five-year strategic plan that includes organic growth. Ed Holland added that the firm "continues to invest in new suppliers, accounts, infrastructure and information technology."

Jamplast is looking to add sales reps east of the Rockies and in the Midwest and Texas, Bernich said. It also wants to grow beyond the 14 companies that it now has recycling projects with. Mass Polymers is hoping to add three or four sales reps or tech support employees, but Mysza said the firm, like many others, has been challenged to find qualified candidates.

At Vinmar, the firm is focused on organic growth through sales and suppliers and is looking for acquisition opportunities as well, Goradia said. "We have good sales coverage in the U.S. and Canada," Dmytruk added. "We want to cover that geography to the best of our ability."

"[Avient] is always looking for strong commercial talent to join our team," according to Dodd. "We seek individuals that can support our key account strategy and bring expertise across the industries where we're active. We also look for similar talent from a geographic expansion perspective."

On the supplier side, Dodd said that Avient "has a robust and solid line card. … Any enhancements will be to build on our sustainable offerings."

Looking ahead to the rest of 2022 and into 2023, resin distributors are optimistic, even if they know there could be some bumps in the road.

"There are some concerns about the economy, but our results for the rest of the year should be good," said Khanna at California Plastics. Although 2022 might not be as strong as 2021, John at PolySource said the industry could see demand growth once it works through existing inventory.

"As we work through economic headwinds, we still see a lot of business out there," Chase said.

"[Osterman] has a good business model, and we're still expanding," Dever said. "There are still projects we're working on — food packaging and medical are still booming."

Welnowski at Nickel City said the first six months of 2022 "were gangbusters," but some markets might now be flat as consumers spend more "on driving or going out to dinner or buying groceries."

"International business will continue to grow," Montachem's Murcia said. "There are a lot of emerging markets."

Sales could be slower for the rest of the year, according to Mysza at Mass Polymers. "There are too many unknowns," he said.

"Orders are backing down a little, but it's more of a rebalancing," Holland said. "People are trying to readjust their inventories. We learned as a country in these last two years that it doesn't take a lot to upset the applecart.

"We still see distribution as a growth market in market share," he added. "Suppliers want to limit what they do. There are things they can't do or don't want to do anymore and they need distribution to pick that up."

According to Tayler at Nexeo, the second half of 2022 "is going to be challenging, moreso in Europe because of Ukraine and the energy crisis. … China has been picking up, and North America has been the steadiest of our regions."

At Avient, Dodd said the firm "sees more pent-up demand in key industries that we'll continue to satisfy."

"We're also watching more reshoring activities in a few of our industries," she added. "We see our first half repeating and continuing on that solid trajectory into 2023."

"Consumer spending has been holding up and inflation should be lower in July," Vinmar's Goradia said. "The price of gas falling has a huge effect on consumers. We're optimistic about the rest of the year."

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