Looking ahead at the Changing Economy
We are seeing significant headwinds ahead for the US economy, and the global economy as well. Of course, the elephant in the room is inflation.
The Fed’s mandate to get inflation close to 2% is going to be painful as it seemingly always is.
The tools we have in place to bring inflation down will cause the economy to contract. We can’t draw any conclusion other than the Fed will continue to raise interest rates and will begin tightening its balance sheet.
These are the tools we have, and given how far inflation has risen, it seems we still have a long way to go.
TAKEAWAY: As the Fed raises interest rates to reduce inflation, the economy will contract for the foreseeable future.
How will Plastics be Affected?
Plastics: What we have seen in the recent past is very notable. It seems there is a large disconnect forming between producers of plastic resin. Specifically, materials such as polycarbonate, ABS, acetal, nylon, and more.
Imported materials have seen a significant decline in pricing and most of our domestic producers have not.
It should be noted that many resin suppliers/distributors have significant stock given the relief in supply chain constraints. Unfortunately, the costs associated with the loosening supply are at pre-deflationary levels.
Given that these distributors are competing for business in a deflationary market it presents significant challenges. Many are having to turn their inventories at very low (and in some cases negative) margin levels.
TAKEAWAY: In order to compete in this contracting market, margins are shrinking. Importing producers seem to be at an advantage.
Prices for Domestic Plastics vs. Imported Plastics
We see this disconnect between imported and domestic pricing on plastic resin beginning to shrink.
Domestic producers will have to reduce pricing and increase production. If this doesn’t happen, domestic producers will lose significant market share to the imported equivalent materials. This will take time and will be painful for some.
For now, it seems US producers of plastic resin are standing firm as they are selling virtually everything they produce. We are of the opinion that will change.
TAKEAWAY: Many US producers are holding prices steady; as painful as it is, that will need to change.
AMR Plastics’ Response to the Changes
At AMR Plastics, we will continue to provide the best products that fit our customers’ needs. When the flexibility allows, we will provide cost-effective solutions including imported and/or domestically compounded resins.
If these cost-effective solutions aren’t an option, we will continue to provide domestically produced prime branded resins at the best prices possible by using our vast network of domestic suppliers.
We remain thankful and look forward to working with our current customers as well as new customers in this volatile market environment.
TAKEAWAY: AMR leverages a wide range of sources to provide clients with the best plastic at the best price.
