Resins Price Outlook: Steady-to-Lower in '13

According to our Resins Price Index, the average price of plastics resins decreased by 3% in 2012. This followed an 11% rise in 2011. This Index, which is calculated monthly, is a weighted average of the published prices for several commodity grade resins. Our forecast calls for a continuation of this moderate downtrend in overall prices in 2013.

Historically, the prices for most type of plastics resins in the U.S. have correlated strongly with the price of crude oil. Because the market for crude oil can be quite volatile, our forecast is subject to change with no advance warning. But this risk notwithstanding, there are a couple of fundamental factors that should keep a lid on resins prices for the foreseeable future.

The most important of these factors is the ongoing and rapid conversion toward natural gas in the U.S. petrochemical industry. At the present time, domestically produced natural gas is much cheaper than crude oil. The price trends of these two commodities will likely converge in the coming years, but for now natural gas enjoys a huge price advantage that will persist through at least the next year.

Another factor that will push down the price of plastics resins in the coming years is a gradual rise in the availability of recycled material. American consumers currently recycle less than 20% of the plastic they use, and the rates for recycling in the construction and agricultural sectors are even lower. But this is slowly changing. The market awareness and acceptance of products made from recycled materials continues to rise. There is a huge potential upside to the amount of recycled material available, and at the current price levels there is a strong incentive to cash in on some of this potential.

But while the medium-term outlook calls for resins prices to be steady-to-lower, it must be noted that the current price levels are quite high by historical comparison. Also, per capita consumption of plastics products, both in the U.S. and globally, continues to rise. This will keep upward pressure on resins prices over the long term.