Baker Institute has published an analysis of the geopolitical impact on the global supply of plastic resin. Beyond its implications for the chemical industry, the report identifies trends relevant to plastics processing technology manufacturers and the packaging sector.

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Instability in raw material from customers

Packaging manufacturers and other plastic converters are facing a supply crisis for polyethylene and polypropylene, the most widely used plastics. Two effects are particularly relevant:

• Price volatility: tensions in the Strait of Hormuz are driving up resin prices and generating high price “floors” that are expected to persist over time.
• Structural shortages: Damage to petrochemical plants in the region could prolong the lack of virgin resin for one or two years. Faced with this prospect, transformers will need machinery that offers them operational security with alternative materials.

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Geopolitical risk on resin redefines machinery requirements

Virgin resin is no longer a stable input. This reality will have direct consequences on the requirements that customers will demand from their machinery suppliers:

• Process flexibility: the machines must be able to work with mixtures of virgin and recycled material (the so-called “mass balances”) without losing efficiency or quality in the final product.
• Adaptation to circular polymers: As virgin resin becomes scarcer, the pressure to use polymers from advanced recycling will increase. Equipment validated to work with these alternative materials will have a clear competitive advantage.
• Versatility in the face of diversification of sources: future supply will come from more distributed and heterogeneous sources. The most versatile machinery, which allows processing different types of resin without complex readjustments, will be the best positioned.

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The packaging sector, at the center of impact

Packaging is one of the sectors most exposed to cost pass-through and supply chain disruptions. For packaging machinery manufacturers, this translates into a dual opportunity: their customers will need to renew or adapt equipment, and the demand for solutions that enable product redesign (using less material or more locally sourced materials) will increase.

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Strategic involvement: the shift towards circular and decentralized models

Beyond the immediate impact, the conflict is acting as an accelerator of a structural change that was already underway: the shift from linear and centralized models (dependent on imported virgin resin) to circular and more decentralized models.

For manufacturers of plastics processing machinery, this raises a fundamental question: to what extent is current equipment prepared for this new scenario? And, more importantly, how can the design of upcoming equipment turn this disruption into a lever for differentiation from the competition?